Don't you dare laugh is an expression that is used to jokingly say "you better not laugh", so you were correct! Like the statement they are talking about may be really silly in origin so the person telling this joke to the other person might say this to warn them that something really silly and funny is going to come up in the conversation-a way to get their attention. A sample dialogue: John: "Hey Rachel! Yesterday, I was feeding a few geese near the lake and I was trying to be really nice...I didn't scare them at all. But you won't believe what happened! You dare not/better not laugh!" Rachel: "What happened?" John: "One of them came up to me and almost pushed me into a tree! It was so embarrassing. I am never feeding birds again!" Rachel: *Laughing* That's so funny!

You are correct in your assumption. "Dare" is where someone has the guts to do something, so the person basically is saying "don't even consider laughing."