As if dropped down from the sky, Dill (Charles Baker Harris) is from elsewhere (Meridian), that is outside the framework of Maycomb, the only source of experience Scout and Jem have ever known. Dill knows city life, has even been to the movies and seen "Dracula," and seems very worldy-wise in comparison to the small town life Scout and Jem have always known.
Dill is also unconventional in that his mother has only recently married and that he was born out of wedlock. He no longer feels he has his rightful place in her life and later even runs away from home, only to appear under Jem's bed back in Maycomb (where he spends his summer vacation with his Aunt Rachael). Dill is insecure and often lonely as an only child growing up in a recomposed family unit, but Jem and Scout see only the advantages of a child "enjoying" less parental control than themselves.(Remember, they've not only got Atticus but Capurnia and Aunt Alexandra as well.) In a way they covet his freedom, in a Huckleberry Finn kind of way.
Dill also has the gift of gab - since he has a ready audience with Jem and Scout, he spruces up his story with whoppers, especially to dissimulate the fact that he is fatherless (and also an illegitimate child). The children soon realize that Dill's bombastic tales are just his way of getting the attention he needs, and they come to value more the paternal care of Atticus, a stable man and a loving father.