Termites are the only insects that are able to digest wood (actually cellulose, the "structural" part of wood). Most termite species require either relatively wet wood (dampwood termites) or contact with soil moisture (subterranean termites). One species, however, the drywood termites live in colonies that are constructed above ground in dry wood and need no contact with soil moisture.
Drywood termites live in warm climates, in both desert and coastal areas. In the US drywood termites are generally found in a band along the southern and coastal states on both coasts (red area in map below).
red area = both subterranean and drywood
termites; green area = mainly subterranean
Damage from drywood termites can be extensive and is often hidden inside structural beams, flooring, etc. Because drywood termites lack connection to the soil they can be difficult to detect and treat.
Subterranean termites are usually controlled by treating the soil under and around structures with insecticide. Drywood termites, on the other hand, may require a very specialized and expensive procedure called fumigation (sometimes called "tent and fumigate").
For more about the biology and control of drywood termite see the pages at 'Bugs.