The dictation in Mountain Lion on my iMac does not record many of the words I speak.
I cannot get it to make a paragraph, either on my desktop, nor my MacBook Pro.
Why does dictation on my MacBook Pro records my words fine but not on my iMac?
Dictation in Mountain Lion requires an active internet connection because OS X contacts Apple servers in the background (the same as Siri uses probably). Is the internet connection on the troublesome Mac up and running?
If it's different between two machines, the most likely issue is the microphone. Are you using the built in Mic on the iMac? If so, try an external one. Also take into account any noise sources around your iMac such as fans, air conditioners, etc.
The other possibility is that you're just getting bad luck with the dictation service. Because it's dependent on Apple's servers, the results can be spotty if load happens to be very high. But if it's happening at different times of the day, chances are it's a microphone issue.