Installing your own PHP is a significant undertaking. You should only attempt it if you are comfortable doing it, and once you have done it you can expect no support from DreamHost. It's a bit like invalidating the warranty on something! You will also be responsible for your installation, and if anyone breaches the server's security because of vulnerabilities you have exposed, you will be liable for it.
I've not done it, but presumably installing your own version of PHP allows you to add functionality that the default installation does not have.
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