Dividends are essentially paid out of after-tax corporate earnings and taxed as part of an individual's personal income. The dividend tax credit mechanism ensures that income is not taxed twice, once at the corporate level and once at the personal level. The gross-up factor and the dividend tax credit rate are set such that the overall amount of tax that's paid on the dividends would be equivalent to the same tax rate that would apply if the individual earned the income as labour income. So essentially there's more neutrality in deciding whether to take the income out of dividends or as labour income.
On May 9th, 2013. See this statement in context.