According to my good friend, Gurudeva Sivaya Subramuniyaswami, Hindu women wear the dot on the forehead for these three reasons:
Answer #1: The dot in the middle of the forehead of the Hindu woman is a beauty mark not unlike the beauty marks European and early American women used to wear on the cheek.
Answer #2: In the old days, Hindu men and women wore these marks, and they both also wore earrings. The dot has a mystical meaning, for it represents the Third Eye or spiritual sight which Hindus seek to awaken through yoga. Today, only the most traditional men observe this, but women continue to follow these traditions.
Answer #3: There are many marks other than the dot that we Hindus use. Each mark represents a different sect or denomination of our vast religion. We have four major sects, Saivism, Vaishnavism, Saktism and Smartaism. By these marks we know what a person believes, and therefore know how to begin conversations.
(information provided by Christy Lawsonarubskinskuvacnylocke)