In this context, "dry" means "[e]xpressed in or marked by a matter-of-fact tone with feigned unawareness of humor." (From the Oxford English Dictionary.) To say that someone's humor is "dry" is actually a compliment. British politicians are often renowned for their dry humor.
As in 'dry wit,' perhaps. I guess you could say W sometimes has a dry wit, although his humor is more often a self-deprecating, down-home Texas kind of wit. Now Dick Cheney has a dry wit, he can sling some zingers.