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Please explain DNG format

I just started working with Photomatix Pro HDR software. It accepts dng files. I note when I first convert my .fff files to .dng that the file size lists as 680x680 pixels, and not the expected 4080x4080.
After running the dng files through Photomatix, and then saving them as a 16 bit Tif, I do note that the size goes back to 4080.
Is the dng file compressed, and does this affect the final image quality at all?
I also have the option of converting them from .fff to Tifs, as Photomatix will also accept Tifs.