Dedupe compares the values from one or more fields from all records & matches them based on the settings found in the configuration file. Multiple set by files can be supplied & Dedupe will perform the deduplication across all supplied files in addition to internally deduplicating all files. An option can be set so that files are not internally deduplicated, but the records are excluded by comparing them against a separate file.
When multiple files are supplied for processing, options can be set individually for each file; this allows files of different formats to be supplied at the same time, with each file having its own custom options.
There are a number of different algorithms available for comparing records; from exact match, to close match, to fuzzy matching.