Basic dictation in OS X uses a similar system to Siri, with audio sent to a server for processing. With Mavericks you can enable Enhanced Dictation that allows you to use the feature while offline. Go to System Preferences, Dictation & Speech, Dictation and check Use Enhanced Dictation. This requires a hefty download to install the needed speech recognition software. Once that is done, you can also use dictation continuously, instead of 30-second chunks. See http://support.apple.com/kb/HT5449 for details.
Mac Video Tutorials and Tips for Apple Users
