Can someone please explaind me what is DLR and how it used in sms gateways?
It is a URL callback for Delivery Reports. Instead of the gateway logging the activity it will callback the provided URL using a querystring at the end with the parameters of the delivery report.
So in order for the URL callback to work you'll need a HTTP webserver with a URL that listens for incoming GET requests:
http://www.example.com/dlr.php
then requests are sent to it like so
"http://example.com/dlr.php?page=dlr&status=[status]&answer=[answer]&to=[to]&ts=[ts]&id=[id]"
The full listing of documentation can be found here.
When you send messages through a gateway you have the opportunity to specify wether or not you want to be notified of events other than the SMSC receiving your message.
When you do specify that you want to receive DLRs the gateway will send you a DLR to let you know that the result of attempting to deliver the message to the network. In case of failure the DLR will contain a code about the reason of failure.
Gateways may send more DLRs (Intermediate Notifications) to notify of other events that happen after the message has been delivered to the network, e.g., delivery to a handset.
You can find more by looking at the SMPP spec, below is a basic diagram of the flow for a Network Delivery Receipt (taken from the spec v3.4).
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