ADF dip is caused by the shielding of part of some ADF antennae (notably the Bendix King one fitted to most light aircraft) during turrns. The effect is to 'dip' the ADF needle towards the low wing in a turn and is most noticeable when the beacon is on the nose or tail and is negligible when the beacon is on the beam. Max error is typically 10 degrees.
What this means to you as a pilot is that the ADF is only reliable when the wings are level although some of the 'gates' around the hold can be modified to take account of expected dip.