From the Xen wiki:
Dom0, or domain zero to expand the abbreviation, is the first domain started by the Xen hypervisor on boot. It has special privileges, like being able to cause new domains to start, and being able to access the hardware directly. Unless DriverDomains are being used, it is responsible for running all of the device drivers for the hardware. For hardware that is made available to other domains, like network interfaces and disks, it will run the BackendDriver, which multiplexes and forwards to the hardware requests from the FrontendDriver in each DomU.
Modified versions of Linux, NetBSD and Solaris can be used as the dom0.
The big to-do with Dom0 support being in the mainline kernel is that they won't have to constantly keep up with the patches previous required (and hinted at in the last line above). From the blog post announcement:
As Linux evolves, now, within that code base, the Linux/Xen bits will evolve at the same rate without separate patch trees and big chunks of code to carry along.