There is no concept of a “root” FTP account at DreamHost. Yes, there is an “initial” user setup of course when you signup. But that user is no more special than ones that you can add later.
Each user gets diskspace set aside for itself, called the home directory, and at the OS level the filesystem path to this home directory is /home/.glob/username and there is a preferred symlink /home/username since the .glob part may change from time to time.
Now the machine is running an FTP daemon, as well as SSH/SFTP programs. These operate differently. The FTP daemon is configured to allow access only to files in the home directory of the user you logged in as. Thus the FTP software will consider the path “/” to be the topmost level you can go, but it can be considered as /home/username and your FTP client can not override that.
Now SSH/SFTP on the other hand is different, there is no restriction on what directory you can access, and your client may very well show you “/home/.glob/username” in the path.
There are many. Obviously if you are hosting sites for different clients you can separate them by having one user host one client and another user host another. Or if you are going to run CGI that uses a lot of resources it may help to manage them by having different users (ie one user for a forum subdomain and another for a blog subdomain). And if credentials are shared you can use them to transfer files from one person to another instead of using email or some web transfer service.
You can “Remap Sub-dir” to setup a url-path so that http://www.mydomain.com/folder/" can be served from a subdirectory of a different user. CGI files uploaded by the other user won’t work though.