Dictionary lists are just files with a list of passwords to try instead of trying to bruteforce it.

For a real life example consider the following:
You have a person in a room and you don't know their name.
So you write down a list of names:
John
Jane
Fred
Wilma

Alternatively you can go and download a list of names from google.

Then you go up to the person and ask them.
"Is your name John? Is your name Jane?"... and continue through the list until they either say
"Yes, my name is ..."
or you reach the end of your list.

If you reach the end of the list without a match you can try bruteforcing.
To do this you would be asking the person "Is your name A, Is your name Ab....Is your name Asdrvb2".
This method will take longer to get a match because it's trying every letter/number combination.

If you want to make a dictionary list more efficient you have to know more about the target.
For example you're trying to guess the persons name, but you know for a fact that this person is female.
So to make the list more efficient only ask the person female names.

Hopefully that makes sense.