Dpi = dots per inch = how many dots (pixels) ur pointer can move when u physically move your mouse one inch.This is why you feel the pointer moving faster when u set a higher dpi,since u are covering more dots per inch of movement.
Polling rate is how fast the CPU and mouse communicates.So at the highest setting (1000hz),ur mouse communicates 1000 times in a second with the computer so to speak,which means there's a lag of 1 milisecond (1/1000th second) between ur physical mouse movement and the movement of your pointer ,i.e. :
Physically move your mouse ---> 1milisecond later -----> Pointer moves

So at a lower polling rate,say 500hz,it's,takes,erm,2 miliseconds to respond?
At 125hz,it takes 8 miliseconds to respond,pretty much like "regular" optical mouses as razer puts it

So.....say you and a fren have the exact same ping in a LAN game.It's the final round and your scores are evenly tied.You're equiped with a kickass Chaos Green Razer Copperhead (with eXactMat

) set at 1000hz polling rate while he has some lame regular optical mouse with an 8ms response time.Being the only 2 survivors,each wielding a single-shot-frag type gun (snipers,railguns,etc),you eventually meet at a corner and although he shoots 6ms before you,you're still gonna frag him since you own an uber mouse XD
(In short,set it at whatever rate u feel comfortable with,I doubt it'll make too much of a difference lol)