The .dockerignore file is similar to the .gitignore syntax. Here are some example rules:

# Ignore a file or directory in the context root named "modules"
modules

# Ignore any files or directories within the subdirectory named "modules" 
# in the context root
modules/*

# Ignore any files or directories in the context root beginning with "modules"
modules*

# Ignore any files or directories one level down from the context root named
# "modules"
*/modules

# Ignore any files or directories at any level, including the context root, 
# named modules
**/modules

# Ignore every file in the entire build context (see next rule for how this 
# could be used)
*

# Re-include the file or directory named "src" that may have been previously
# excluded. Note that you cannot re-include files in subdirectories that have 
# been previously excluded at a higher level
!src

Note that "build context" is the directory you pass at the end of your build command, typically a . to indicate the current directory. This directory is packaged from the docker client, excluding any files you have ignored with .dockerignore, and sent to the docker daemon to perform the build. Even when the daemon is on the same host as your client, the build only works from this context and not directly from the folders.

There is only a single .dockerignore for a build, and it must be in the root of the build context. It will not work if it is in your home directory (assuming you build from a subdirectory), and it will not work from a subdirectory of your build context.

To test what is in your current build context and verify your .dockerignore file is behaving correctly, you can copy/paste the following (this assumes you do not have an image named test-context, it will be overwritten and then deleted if you do):

# create an image that includes the entire build context
docker build -t test-context -f - . <<EOF
FROM busybox
COPY . /context
WORKDIR /context
CMD find .
EOF

# run the image which executes the find command
docker container run --rm test-context

# cleanup the built image
docker image rm test-context

To expand on VonC's suggestion, here's a sample build command you can use to create an image with the current folder's build context:

docker image build --no-cache -t build-context -f - . <<EOF
FROM busybox
WORKDIR /build-context
COPY . .
CMD find .
EOF

Equivalent PowerShell:

@"
FROM busybox
WORKDIR /build-context
COPY . .
CMD find .
"@ | docker image build --no-cache -t build-context -f - .

Once created, run the container and inspect the contents of the /build-context directory which includes everything not excluded by the .dockerignore file:

# run the default find command
docker container run --rm build-context

# or inspect it from a shell using
docker container run --rm -it build-context /bin/sh

You can then cleanup with:

docker image rm build-context