To dismiss a lawsuit is to terminate a lawsuit. The Plaintiff can unilaterally file a Motion/Notice to dismiss the lawsuit or the two parties can agree to "Stipulate" to dismiss the lawsuit. Simply speaking dismissing a lawsuit makes it as if it had never been filed.
Dismissing With or Without Prejudice:
When a case is dismissed with prejudice the court the Plaintiff is prevented from filing the same lawsuit again. If the case is dismissed without prejudice then the Plaintiff is free to file the same lawsuit at a future date.