What is the Target Dummy used for?

The training dummy in Torchlight 2 doesn't provide you any information besides damage numbers done per hit. You would personally have to determine stats based on the damage you are doing.

For example if you are experimenting with accessories and weapons you can test out one setup and see how much damage you are doing per hit. Then you could swap out to another set of weapons and gear and visually compare to what you were doing previously to see if you are doing more dps with your new set of gear compared to your old one.

So really the dummy does not provide more detailed information than just damage done per hit. It is up to the player to decide on how to use the damage information the dummy provides on how to set up their gear.

You should be able to see damage numbers whenever you hit the training dummy. If you can't see these numbers, you may need to adjust some of your settings. From this thread:

Settings > Floating Damage and Text > Verbose

This will show all damage numbers and will allow you to see which weapons/equipment will give you the best results.