When Aang entered the Spirit World for the first time, he encountered the Dragon Spirit in a cave. Surprised to see the Avatar after a hundred years of absence, he asked Aang where he had been.
The Spirit's advice was sought after again when Aang was at the Northern Air Temple; The Dragon Spirit warned Aang of his vision of the Moon turning red.
While he was meditating at the Spirit Oasis, Aang came to the Spirit once again, seeking help on how he could defeat the massive invasion force of the Fire Nation. The Dragon Spirit advised him to free himself of the guilt he felt for the loss of his people, so he would be able to use the Ocean and show them all "the power of water".
Despite his fearsome appearance, once he spoke to Aang, he seemed kind and approachable. Aang was able to confide and seek advice from him, as his animated counterpart did with Avatar Roku during his travels. Like Koh, he was ancient, wise, and a knowledgeable supernatural creature, and could be somewhat scary to Aang when he slithered in and out and around him in his cave. When Aang first entered his cave, the dragon's head suddenly popped out from the mist, surprising Aang, similar to Koh popping out the faces that he stole.
Before the Dragon Spirit was finally cast with John Noble, the Kiss bassist/vocalist Gene Simmons wrote on his website that he was asked to do the role: "Yesterday, I went up to Vox, where I was asked to do the voice of the Dragon Spirit in M Night Shyamalan's forthcoming AIRBENDER movie. This may or may not come to fruition. We'll see."
He is a composite character created for the film series to take over the roles originally played by Avatar Roku, Fang, Koh, and Guru Pathik.
Every time Aang entered the Spirit World, he followed the forest paths lit by lanterns that lead him back to the cave where the Dragon Spirit resided.
The Dragon Spirit referred to the library (which Zhao stole knowledge of the Ocean and Moon spirits from) as the Great Library, just as referred by Zhao himself multiple times in the film: "I have seen a vision of the moon turning red. The Fire Nation has stolen knowledge of us from the Great Library. They are planning to misuse this knowledge." His awareness of the events that took place in the library either means that he was in communication with the custodian of the library, or was the custodian himself, the latter may suggest that he is assuming the role of Wan Shi Tong from the animated series.
The Dragon Spirit telling Aang to let go of the guilt he felt for the demise of his people is similar to Guru Pathik advising him to let go of his guilt to unlock his water chakra in the series. This was changed from the novelization: the Dragon Spirit advised that Aang may have to choose between being an Avatar and being with Katara, in reference to Guru Pathik advising Aang to let go of worldly attachments to unlock his Seventh Chakra.