DSL was originally developed as an experiment to see how many usable desktop applications can fit inside a 50MB live CD. It was at first just a personal tool/toy. More here
DSL has a nearly complete desktop, and a tiny core of command line tools. All applications are chosen with the best balance of functionality, size and speed. Damn Small also has the ability to act as an SSH/FTP/HTTPD server right off of a live CD.