Well its more complicated. For the most part DPI is just a meaningless marketing tool. At a certain point DPI gets too high to be useful even if you lower the sensitivity of the in game mouse settings. DPI is a total crock since it isn't even DPI, its CPI - counts per inch. DPI is incorrect popularized vernacular but not actually accurate.
Secondly the DPI doesn't help do anything except give you a hardware control over the sensitivity of the mouse, like having a volume control on your keyboard. Does that keyboard button improve the quality of the sound? Nope. It just makes it handier to change. Counts per inch isn't an improvement of the actual accuracy of the mouse's laser or optic, its just a software interpretation of what that movement means to the mouse pointer. As far as I know DPI is all software, not hardware.
If you want to improve the actual accuracy of your mouse's readings off the surface of your mouse pad or whatever its reflecting off of then you want to increase your polling rate. Polling rate is how many times a second the mouse checks the information the mouse is receiving from its tracking device and the more often you check it the more accurate your movements are going to be reported to the computer. It is a hardware reading on the movements of the mouse. Imagine a radar set sending out a constant signal. The polling rate is analogous to how often the receiver checks the signal. Changing the polling rate can be achieved either by hacking the drivers for your mouse or in the case of my Logitech G5, just going into the advanced settings. For all intents and purposes 500Mhz is good. I can turn mine up to 1000.
So in short DPI is just a hardware-side control over the sensitivity of the mouse, a factor of how much you move the pointer for how much you move the mouse, while polling rate is an actual alteration to how the mouse reads the physical changes of the mouse's real world position.
DPI is not much different from altering the sensitivity slider in game, but Polling Rate is actually relevant to the accuracy of your movements of the mouse.
Explanation of Polling Rate:
OCZ Equalizer 2500 DPI Laser Gaming Mouse