In simple words, essential dignity is the happiness quotient of the planets.
The essential dignity of planets is the nature of a planet’s energy and the quality of the results it gives when placed in a certain Zodiac sign. There are five types of essential dignity: Domicile + Detriment, Exalted + Fall, Triplicity, Terms or Bounds, and Decan or Face.
The type of essential dignity a planet displays depends on its relationship with the Zodiac sign it is placed in and the degree in which it is located in the sign.
For example, when a planet is placed in its ruling sign, it is said to be in domicile. In this sign, it is most comfortable and happy. Hence when in domicile, a planet's positive qualities or strengths are activated. Its essential dignity is strongest in this placement, and the planet is encouraged to give positive results or outcomes.
When a planet is located in a friendly sign, its essential dignity is still strong but not as strong as in its ruling sign. In this position, its essential dignity is exalted. But here also, since it is comfortable, its strengths and positive qualities are activated.
Similarly, when a planet is in a sign opposite to its ruling sign or in an unfriendly sign, its essential dignity is weakened and is said to be either detrimental or fall. In this position, the planet's positive strengths are not able to give the desired results. And its negative energy or weaknesses tend to be more visible.