In software development, "dogfooding" is just an overhyped word for what I think should be called "testing". Actually using the product? Like a customer would? Should be a very obvious step.
The term was popularized by Microsoft, but they are one of the companies out there for whom "eating their own dog food" is a bit more sensible than in other companies. If you make software for managing dental office management, it's a different situation than if you are developing, say, an operating system / word processor / web browser / mail server / software development tool ... something that a software developer would normally use on a regular basis.
But by the same token, it makes sense for sysadmins for a lot of the same reasons -- we are often maintaining the same systems that we use anyway. So whenever you can use the same script / restrictions / application / database / server / diskimage / network / whatever that your users do, you should do it -- that's dogfooding. Try everything once. After a while, try it again.
Also note that eating the dog food yourself too often is bound to produce bloat, in my opinion. This is not just a pun!