What is the purpose in dentistry of dental dams?

It is a device placed in the mouth to isolate a tooth during a procedure so not to get any saliva or water on the tooth. :)

Dental dam is a rubber membrane which prevents bacteria and saliva getting in the area that is worked on, especially when the dentist is using materials that are sensitive to moisture. They are fixed with a bracket and no pain is experienced. Here's a video showing the use of a dental dam -

http://www.checkdent.com/en/videos/what-is-a-dental-dam-106.html