Dried Curd Chillies have been marinated in curd/yoghurt on and off for several days, to absorb the yoghurt, and then dried in the sun. The yoghurt tempers some of the spicy heat of the chillies, and they develop a tangy, yogurty flavor. They are commonly eaten alongside the dishes that form a meal, like a pickle, or are used as a salty, spicy garnish. Like Dried Stuffed Chillies, they can also be used instead of dried red chiles in recipes, particularly in tadkas.
Curd chillies are favourites of Kerala but also made in Andhra Pradesh and the Konkani regions.
To use them, they are deep fried or sauteed very briefly (perhaps 30 seconds in hot ghee or oil), then crumbled over dishes or eaten alongside the dishes that form a meal. They can also be used with rice and dal, in raita and Koshimbir salads.
They are a favourite when used with curd rice. They add a satisfying crunch, some heat, and another layer of yoghurt flavour. Sambar Rice is another dish they are often paired with. As well as rice dishes, they also go well with dosa, even toast. I love them crumbled into salads. Crumble and sprinkle over any dish that needs a lift.
You might like to also have a look at Dried Stuffed Chillies of Maharashtra.