Dungeon types are used when creating the dungeon name and choosing the external block that will be associated to the entrance. The dungeon interiors reuse the same dungeon blocks with a different texture skin. The type can also influence what enemies are found inside besides the player level.
In my old collection of Daggerfall files i have a list of all dungeon types, obtained using one of those obscure commands made by some Daggerfall fan: crypt, orc stronghold, human stronghold, prison, desecrated temple, mine, natural cave, coven, vampire haunt, laboratory, harpy nest, ruined castle, spider nest, giant stronghold, dragon's den, barbarian stronghold, volcanic caves, scorpion nest.
Obviously Daggerfall dungeon blocks are too restricted to represent all these places and the layouts of dungeons not always match their purpose because of this limitation. With more variety, dungeons would be more immersive.
Sometimes the entrance doesn't match the dungeon type. This happens with Privateers Hold for example. It should have used the ruined stronghold entrance instead of the small cave entrance.
It's interesting that the Daggerfall dungeon name generator adds a few extra elements, that are not listed above, like huge trees used as dungeon entrances.