A desiccant dryer uses desiccant beads to adsorb the water in compressed air. These beads draw the water out of the air using molecular adhesion. The beads are porous, allowing water to get “stuck” to them. They do not react with water, so if only clean air and water is contacting them, you don’t have to replace the desiccant; you only have to regenerate it. Eventually the beads do get contaminated and the water particles don’t stick anymore, requiring replacement (that should take years.)
Compressor lubricant is the main culprit that contaminates the desiccant. If you get oil droplets on the beads, it forms a film over the desiccant. This film does not allow the beads to absorb water. That’s the reason you see filters in front of a desiccant dryer. A coalescing filter catches the oil droplets, but before that you often need a particulate filter to protect the coalescing filter. After the dryer, you need another particulate filter to catch desiccant dust. Sometimes a fourth filter is needed for higher purity applications; a carbon filter to remove oil vapor.
Desiccant dryers can only absorb so much water before the beads become saturated. Regeneration is just getting the water off the desiccant so it can catch more. This is done by either blowing air or heating the beads – sometimes both at the same time.
This is simple. You need a desiccant dryer if a dew point below 35°F is required for your compressed air system. Anything else, you can use a refrigerated dryer, which would usually be more energy efficient and cost less to maintenance.