Expanding and illustrating further, dwell is the time (typically expressed in degrees rotation, though I've seen some older Fords express it as a percentage) that the points are in contact as illustrated.
Dwell angle is inversely proportional to point gap, thus increasing the gap increases dwell and vice versa.
Too small a point gap will pit and wear quickly due to a higher total average current through the points, too far and you'll have ignition failure at higher RPM due to point bounce.
Ergo, you set your point gap within the tolerances specified in the manual in order to attain the dwell tolerances specified in the manual. If these two specifications can not be met simultaneously, a new set of points is in order (necessary for a taller rubbing block to make up the delta in the geometry due to excessive wear). If the condition is not rectified by a new set of points, a new distributor shaft is in order (or just a new distributor, as previously mentioned). Electronic points bypass the wear point issues that may arise between the rubbing block and the distributor shaft, and are an excellent alternative when (as may be the case) a new distributor is NLA.