DC stands for dream character, which is basically any person in your dream other than yourself. I suspect that the term dream character was chosen to reflect the fact that the only "real" person in your dreams is yourself, and the other people can be likened to characters in a play or movie.
Here is a really interesting (and long) thread on people's different experiences communicating with DCs:
Communicating With Dream Characters
People have reported all kinds of interactions with DCs while lucid, but there does seem to be a general trend for DCs to be either impassive and/or semi-coherent (at best). Check the thread out, I think you'll like it.
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