I'm not really sure why it works, but it does. I've seen trout come up to inspect the dry and then turn and take the nymph. I've caught far more trout on a nymph than on a dry, and usually in that configuration. I've also been in a few situations where I've caught more on the dry than on the nymph. This eventually leads me to cutting the dropper of and going dry only. Think of it as being a way of fishing two flies to find out what they are going after.
In case you are not sure how to do this, the method I use is to tie about 18" of tippet (I usually go with 5 or 6x in the park) to the bend of the dry fly hook, and then tie on the nymph. The most important thing though is to look at the water and figure out what is going on. I've actually fished a dry with a terrestrial dropper, just don't put any floatant on the terrestrial fishing it as a wet fly.