The dumbbell side bend adds resistance to the lateral flexion of the spine, and therefore is a good exercise for targeting the obliques (the muscle which runs diagonally on either side of the abdomen).
It is important to only move through the lateral plane, not allowing the torso to flex forward or extend backward. The hips should remain stationary throughout.
As stated, the side bend is good for the development of the obliques, but it will not lead to localised fat loss from the waist like some believe. If you wish to reduce fat levels around your waist then a training program and diet suited to overall fat loss should be followed, with resistance training included to improve body composition (increased lean tissue). The combination of fat loss and muscle development will lead to a more defined appearance.