Dodge Dropping is basically a way for characters to dodge and drop an item they're holding at to same time. Rather than dropping an item and re-grabbing it. All characters can do this but only a few have actual use for it.
To perform press the dodge and attack or grab buttons at almost the same time but without moving to analog stick or it won't work.You will gain invincibility frames while damaging opponents up to setup for a "combo" or chain of attacks against anyone. This is most useful for (Toon) Link or Snake with good timing saying that you can stay close without worrying that you'll be caught in the blast.
Dodge Dropping in action http://www.youtube.com/watch?v=-ByPwv8XydE http://www.youtube.com/watch?v=e71yBIVaq1w&feature=related