Dutch Roll is a coupled lateral/directional oscillation which is usually dynamically stable but is objectionable in an airplane because of the oscillatory nature. The damping of the oscillatory mode may be weak or strong depending on the properties of the particular airplane.
Unfortunately all air is not smooth. There are bumps and depressions created by gusty updrafts and downdrafts, and by gusts from ahead, behind, or the side of the airplane.
The response of the airplane to a disturbance from equilibrium is a combined rolling/yawing oscillation in which the rolling motion is phased to precede the yawing motion. The yawing motion is not too significant, but the roll is much more noticeable. When the airplane rolls back toward level flight in response to dihedral effect, it rolls back too far and sideslips the other way. Thus, the airplane overshoots each time because of the strong dihedral effect. When the dihedral effect is large in comparison with static directional stability, the Dutch Roll motion has weak damping and is objectionable. When the static directional stability is strong in comparison with the dihedral effect, the Dutch Roll motion has such heavy damping that it is not objectionable. However, these qualities tend toward spiral instability.
The choice is then the least of two evils, Dutch Roll is objectionable, and spiral instability is tolerable if the rate of divergence is low. Since the more important handling qualities are a result of high static directional stability and minimum necessary dihedral effect, most airplanes demonstrate a mild spiral tendency. This tendency would be indicated to the pilot by the fact that the airplane cannot be flown "hands off" indefinitely.
In most modern airplanes, excepting high speed swept wing
designs, these free directional oscillations usually die out automatically
in a very few cycles unless the air continues to be gusty or turbulent.
Those airplanes with continuing Dutch Roll tendencies usually are equipped
with gyro stabilized yaw dampers. An airplane which has Dutch Roll tendencies
is disconcerting, to say the least. Therefore, the manufacturer tries to
reach a medium between too much and too little directional stability. Because
it is more desirable for the airplane to have "spiral instability" than
Dutch Roll tendencies, most airplanes are designed with that characteristic.