Update: See Artha, Open Source Offline Thesaurus and Dictionary
1. Wordweb Free Dictionary
Wordweb is probably the best freeware dictionary out there. WordWeb is available as a powerful Pro version and a cut down free version. The free version is used by millions of people from all over the world, many of whom may not be able to afford a commercial dictionary.
It sits in the system tray and can be launched from within any program. Wordweb by default integrates into MS Word and gives you a one click access to it from within Word. Apart from definitions, Wordweb shows you synonyms, related words and the root of the words. Wordweb has more than 150 000 root words and 120 000 synonym sets.
2. TheSage's English Dictionary and Thesaurus
TheSage's English Dictionary and Thesaurus is a professional software package that integrates a complete dictionary and multifaceted thesaurus of the English language into a single and powerful language reference system.
TheSage can look up words directly from almost any program (IE, Word, Firefox, Outlook, Thunderbird, etc ) and is 100% portable. You can just copy it to your pen drive and take it along with you.
TheSage allows you to look up words directly from most applications, offering multiple detailed definitions each coupled with its own thesaurus. It has over 145,000 references with multiple detailed definitions (over 200,000) and a complete thesaurus with nearly 1,200,000 relationships between definition. TheSage has a tabbed interface, which is a rage these days, and supports wildcard search which is extremely helpful.
Stardict is a free open source off-line dictionary program that allows you to use all those free dictionaries (at the moment more than 100 dictionaries are available). StarDict is just a dictionary shell, so when you download it you have no dictionary that comes along. You have to install dictionaries yourself.
Stardict supports an interesting search concept called Fuzzy query. When you can't remember how to spell a word exactly, you can try StarDict's Fuzzy query. It uses "Levenshtein Edit Distance" to compute the similarity between two words, and gives the match results which are most similar to the word that you input. To create a fuzzy query, just input the word with a beginning "/", and then press Enter.
4. Everest Dictionary
Everest Dictionary has a total of 35 dictionaries available to date. It's possible to search words across multiple dictionaries. It also monitors the clipboard; in any program, a simple copy of the word to the clipboard using "Copy" command will launch the automatic search of the word in the dictionary.
tinySpell is not exactly a dictionary, it's a spell checker. The reason I've included this on my list is because we often look up a dictionary not to learn it's meaning but to check it's spelling, don't we?
Occasionally you need to check spelling in an application that does not include a spelling checker and you don't want to launch your word processor just for that. This is when tinySpell becomes handy. It is a small utility that allows you to easily and quickly check and correct the spelling in any Windows application.
The most useful feature of tinyspell is it's on-the-fly spell check. tinySpell can watch your typing on the fly and alert you whenever it detects a misspelled word. It can also check the spelling of text that you copy to the clipboard. tinySpell installs itself in the system tray for easy access. It comes with an American-English dictionary containing more than 110,000 words. tinyspell is a must have addition to your (already cluttered) system tray.