Dwight, Negan explains toward the end of the episode, abandoned the Sanctuary and betrayed him, and he only earned his way back into his (and Lucille's) good graces the hard way. Dwight took an iron to the face, and Negan took Dwight's wife: Sherry, the woman introduced with Dwight back in Season 6, is now Negan's partner and property, his to have his way with, and, apparently, the aspiring mother of his child. Dwight isn't exactly overjoyed with the situation, as one might imagine. But he's convinced himself that all of this -- all of the humiliation, the indignity, the loss, and the abuse -- is preferable to death. He's enjoying a relatively privileged position as an officer in Negan's army. He's learned to do without niceties like happiness or pride.