Wet rot and dry rot are very different. Wet rot is caused by too much water. Dry rot is caused by a fungus, Serpula lacrymans, which lives inside buildings that are damp and not well-ventilated. Dry rot is able to travel through a building in other materials, not just wood, meaning it can rapidly spread through the entire building.
The early stages of dry rot appear as off-white cotton-like sheets on timber and brick work. The wood begins to darken and crack in a cube-like manner. As the decay continues, it will produce a wet, musty odor.
Later stages include thick, white fungal strands, a brick-red coloring and deep cracks along the grain of the wood. Mycelium, the thick fungal strands, develop in more humid conditions, while a silky gray skin with lilac and yellow colored patches appears in less humid locations. The red coloring comes from spore dust and usually is seen around fruiting bodies, soft orange-ochre colored surfaces with wide pores.
Typically, the best way to avoid dry rot is to keep the wood dry in the first place. By taking care of the areas in which water can soak into the wood, you can avoid the whole process to begin with.
Treatment of dry rot consists of discovering where the wood is being dampened with water and getting the water out of the wood. All affected material must be removed and replaced, and water must be prevented from dampening the wood again.