.dmg is a disk image. You need Disk Copy to mount the image on your desktop.

Disk Copy should be in the Applications->Utilities folder in both OS9 and OSX. If it's not there, open Sherlock (command F) and search for it. Once you've found Disk Copy, open it, drag the .dmg file into the Disk Copy window and it should mount the file as if it were a disk on the desktop. If that doesn't work , then the file is probably corrupt.

If you open the disk icon that appears and see a file with a .pkg suffix then you can only install it in OSX.