One dot means that the next hammer will be an odd number.
Two dots mean that the next hammer will be even.
You cannot get the same number twice in a row (or the next time after).
Example: Swing the hammer get a 7 with a single dot over it. Your next hammer will then be an odd number but will NOT be 7. Say it ends up being a 9 with one dot. Now your next hammer can't be a 7, 9, or any even number. (leaving only 1, 3, or 5). The Dot system can be used as a way to "judge" when it's *safe to use the hammer. (Never truly safe as the result is still more or less random but it gives you a better idea of what the outcome will be).
Also note that at the start of the game you're first swing will NEVER be a 1 or a 2. And your second swing will NEVER be a 1.