"Dwelling" comes from the Old Saxon "wuon", the Gothic "wunian", and is related to the German "bauen", which is "to build".
It indicates that one remains, or stays in a place.
Wunian, more specifically, says how this staying in a place is to be experienced: it means "to be at peace, to be brought to peace, to remain in peace."
The word for "peace", Friede, means the free, das Frye, and indicates "preserved from harm and danger, preserved from something, safeguarded". To free means to spare and preserve.
Putting all this together, Heidegger traces the notion of dwelling to its fundamental character, which is to spare and preserve.We dwell in a place when we are at peace in that place, when we exist there in freedom which leads us to spare and preserve that place. One dwells in a home, and one preserves and protects that home. It is also the place where, at least at the best of times, the facades are dropped. You can "be yourself" where you dwell. You don't have to put on a role for a particular occasion.
For many people, home has bad connotations. Home is a place of tension, of abuse and estrangement. But that's not home, then, for Heidegger.
We must dwell, but we always dwell imperfectly. We are never completely severed from home; we are never completely at home. However, it is Heidegger's contention that we have largely forgotten how to dwell. To understand this we need to see his structure of dwelling.
Home consists of four parts:
The earth: He seems to mean the experience of diversity, particularly of life. This is not just the scientific knowledge of biodiversity. It is the experience that there are beginnings and endings, changes.
The sky: With diversity there is also the experience of permanence. This is not the permanence of nothing ever changing – this is the permanence of cycle, and the forces beyond our control.
The gods: We have access to something transcendent when we dwell. It is not just a house, it is the place that shows us as we are. We "do not make gods for ourselves and do not worship idols" - in other words, we recognize that there is truth that is not simply created by us.
The mortals: As mortal, we choose our own way of being in the world. We are not God, who could be anything and everything. We will die, which means that we have to choose what we will be. There are limits, but those limits make us what we are.
Heidegger suggests that each of these is found in all. Each assumes the others.