Dismiss Pet will send your pet away temporarily. You can call it back with Call Pet.
Many hunters are put off by the dire "your pet will reduce its happiness by 50" warning, and rarely or never dismiss their pet. But consider this: A pet with loyalty level 6 (Best Friend) will lose happiness over time by just standing around at a rate of about 500 happiness per hour. This means that in 6 minutes of doing nothing, the pet will lose the same 50 happiness. This is worse for lower loyalty levels. Also, good food will give 35 happiness per tick, for a total of 350 happiness. Even the worst acceptable food will give 80 happiness. This makes the loss of 50 happiness through the Dismiss look a lot less scary.
Tips and tactics
You can also rid yourself of your pet by telling it to Stay and then walk you of range. It is suggested that this does not lose happiness.
Dismiss Pet can be used to save your pet from death. Don't wait for the last moment, as the cast time is rather long.
You may want to use Dismiss Pet to prevent it from drawing aggro in certain areas, especially if you pet's level is lower than yours.