ArcGIS 9.0 In ArcToolbox navigate to Conversion Tools/To Raster/Floating to Raster/ The Input float file is the .dem file, HOWEVER, you must change the extension to ".flt" In other words, if your file is "dem001.dem" you change it to "dem001.flt"
ArcGIS 8.x: In ArcToolbox navigate to Conversion Tools/Import to Raster/Floating Point Data to Grid The Input float file is the .dem file
ArcView 3.x: Require the spatial analyst extension to view as a grid. File/Import Data Source Select the file type as Binary Raster and navigate to the *.dem file.
Arc/Info Workstation: At the Arc prompt Arc: FLOATGRID <in_file> <out_grid> example - Floatgrid dem032.dem dem032