Cassini VIMS has obtained spatially resolved imaging spectroscopy data on numerous satellites of Saturn. A very close fly-by of Dione provided key information for solving the riddle of the origin of the dark material in the Saturn system. The Dione VIMS data show a pattern of bombardment of fine, sub-0.5-??m diameter particles impacting the satellite from the trailing side direction. Multiple lines of evidence point to an external origin for the dark material on Dione, including the global spatial pattern of dark material, local patterns including crater and cliff walls shielding implantation on slopes facing away from the trailing side, exposing clean ice, and slopes facing the trailing direction which show higher abundances of dark material. Multiple spectral features of the dark material match those seen on Phoebe, Iapetus, Hyperion, Epimetheus and the F-ring, implying the material has a common composition throughout the Saturn system. However, the exact composition of the dark material remains a mystery, except that bound water and, tentatively, ammonia are detected, and there is evidence both for and against cyanide compounds. Exact identification of composition requires additional laboratory work. A blue scattering peak with a strong UV-visible absorption is observed in spectra of all satellites which contain dark material, and the cause is Rayleigh scattering, again pointing to a common origin. The Rayleigh scattering effect is confirmed with laboratory experiments using ice and 0.2-??m diameter carbon grains when the carbon abundance is less than about 2% by weight. Rayleigh scattering in solids is also confirmed in naturally occurring terrestrial rocks, and in previously published reflectance studies. The spatial pattern, Rayleigh scattering effect, and spectral properties argue that the dark material is only a thin coating on Dione's surface, and by extension is only a thin coating on Phoebe, Hyperion, and Iapetus, although the dark material abundance appears higher on Iapetus, and may be locally thick. As previously concluded for Phoebe, the dark material appears to be external to the Saturn system and may be cometary in origin. We also report a possible detection of material around Dione which may indicate Dione is active and contributes material to the E-ring, but this observation must be confirmed.