Microsoft’s description:

The Display tab also lists your device’s available memory and can tell you if your video driver has passed Microsoft’s Windows Hardware Quality Labs (WHQL) testing regimen by checking whether the WHQL Logo’d is set to Yes or No.

Note Dxdiag.exe cannot report memory that is in use at the time that it starts. Therefore, it is not uncommon to see less memory reported than your video card actually has.

DxDiag description on Wikipedia:

DxDiag (“DirectX Diagnostics”) is a utility designed to display the specifications of the user’s hardware, as well as to test DirectX software, including sound and video. DxDiag was first released on August 7, 1998 as part of DirectX 6.0 and the successor to DXInfo. To open this program type dxdiag in the Windows Vista start menu search bar or the Run command (Start->Run…) in any other version of Microsoft Windows (see image).

DxDiag is a diagnostics tool used to test DirectX functionality and troubleshoot video- or sound-related hardware problems. DirectX Diagnostic can save text files with the scan results. These files are often posted in tech forums or attached to support emails in order to give support personnel a better idea of the PC the requester is using in case the error is due to a hardware failure or incompatibility.

DxDiag by default located in %SystemRoot%\System32.^[1] In Windows Vista, DxDiag only shows information; it is no longer possible to test the hardware and the various DirectX components. ^[2]

Functions

The System tab displays the current DirectX version, the computer’s hostname, the operating system’s version, information on the system BIOS, and other data. The DirectX Files tab displays information about the versions of specific DirectX system files, which are mostly portable executables or dynamic-link libraries (DLLs).

DxDiag displays information about the current display settings and the video hardware on the Display tab. If the computer has more than one monitor, then DxDiag will display a separate tab for each monitor. This tab can disable DirectDraw, Direct3D, and/or AGP Texture Acceleration for troubleshooting purposes. If the installed display driver has passed Windows Hardware Quality Labs testing, DxDiag will display this result on the right side of the window.

The Music tab displays information about the computer’s MIDI settings, and lists different music-related software and hardware on your computer. The Input tab, displays information about input devices installed in the computer such as keyboards and mice. It will also attempt to detect problems with these devices. DxDiag displays information about the installed DirectPlay Service Provider. It is possible to set up a very basic chat room using the network diagnostic and inputting various IP addresses.