Dialectric grease is basically a silicone grease which may seem odd because silicone is actually insulating. The fact is that you can still apply it liberally and directly to electrical contacts because the grease is actually pushed out of the way when the metal contacts come together. (Kind of like air is pushed out of the way when the metal contacts come together.)
So what you get when using dialectric grease is a perfect electrical connection, without no resistance and the connection is also fully insulated from the outside elements.
Here's a good post about it on a motorcycle forum:
Can anyone comment on it's proper use/application? I assumed you'd use it to spray electrical plugs/contacts before reassembly to prevent oxidation....
advrider.com
@alaskawet I think it depends on the type of dialectric grease but I think most of it can withstand very high temperatures since it is made from silicone. It can also be used on spark plugs in car engines, so I don't think it would ever catch fire.
Here's is what I found on Wikipedia about silicone grease a.k.a. dialectric grease:
Electrical utilities use silicone grease to lubricate separable elbows on lines that must endure high temperatures. Silicone greases generally have an operating temperature range of approximately −40 to 200 °C (−40 to 392 °F) with some high-temperature versions extending this range slightly.
en.wikipedia.org