In econometrics we often use "dummy variables", to allow for changes in estimated coefficients when the data fall into one "regime" or another. An obvious example is when we use such variables to allow the different "seasons" in quarterly time-series data.
I've posted about dummy variables several times in the past - e.g., here.
However, there's one important point that seems to come up from time to time in emails that I receive from readers of this blog. I thought that a few comments here might be helpful.