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DJGPP is a freely available 32-bit development system, based on the GNU development suite, that runs on and produces programs for PC compatible computers with a 386 or higher processor and running DOS or a DOS-compatible operating system or emulator.

That's a mouthful, but it's true. Let's take it one bit at a time, shall we?

DJGPP is freely available.
Note that the intent here is that you can legally copy DJGPP from a friend, even if you don't pay a cent for it, but it does not imply that you are entitled to a no-cost copy of DJGPP, or that you may not charge a fee for it. Please note, however, that there are a few "official" ways of getting DJGPP, and these should be checked to make sure you have the latest version if you get your copy from some other source (BBS, friends, etc). DJGPP is also a "royalty free" system, in that you may (in most cases) sell programs you write with any terms and conditions you want.
DJGPP is 32-bit.
In order to use DJGPP, or run any program you write with DJGPP, you must have a 32-bit CPU in your machine. This means an 386, 486, etc. You cannot use djgpp on a 286. However, all your programs will use 32-bit integers, 32-bit pointers, and will no longer worry about running into the 64K or 640K barriers.
DJGPP is a development system.
The purpose of DJGPP is to give you the ability to create new software, from scratch. Since you and the computer don't speak the same language, what you type must somehow be converted into a language the computer understands. This is what a development system does. DJGPP includes all the tools you need to develop programs, including an editor (emacs), compiler (gcc), debugger (gdb), and the runtime (libc).
DJGPP is based on the GNU development suite.
Most of the core programs of DJGPP, like gcc, as, ld, and gdb, come from the GNU project, which is creating set of freely redistributable Unix programs, some of which are a Unix development environment. These programs have been ported to DJGPP and are used to form the core of its development tools. For more information about the GNU project, see http://www.fsf.org/
DJGPP runs on and produces programs for ...
Since DJGPP was built with itself, the set of machines that DJGPP runs on and the set of machines that DJGPP-built programs run on are the same set of machines.
... PC compatible computers
The target hardware for DJGPP programs is the PC platform.
... with a 386 or higher
You cannot use DJGPP on a 286, because that's not a 32-bit processor.
... running DOS
Yes, I know Windows is "the wave of the future", but I don't like it, so I don't support it. DJGPP is for making DOS programs, and if you can convince it to make a Windows program, good for you.
... or a DOS-compatible operating system
DJGPP programs run under Windows' "dos prompt" boxes, OS/2's dos box, PC-DOS, MS-DOS, NDOS, and other compatible operating systems.
... or emulator
You can run DJGPP programs in Linux's DOS emulator or any other emulator that emulates a 386 and supports the DPMI interface.
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