There was Mercian and Northumbrian in the north, West Saxon in the south and west, and Kentish around Canterbury. These were the major dialects, and kingdoms. Lesser kingdoms, with their own dialectical variations, include East Anglia, Essex, Sussex; also the division within Northumbria between the realms of Bernicia and Deira may have had a corresponding slight variation in speech.

The groups of Old English dialects are generally accepted to correspond to the three original Germanic tribes: the Angles in the north (Northumbria, Mercia, East Anglia), the Saxons in the south (Essex, Wessex, Sussex), and the Jutes in Kent. An alternate possibility that has been proposed is that these dialectical divisions stem from different waves of migration, rather than original continental tribal divisions.

West Saxon is pretty much the standard dialect, so that's what everyone starts out learning when they learn Old English. Thus, for me at least, the prose text of the Anglo-Saxon Chronicle is relatively easy to read, whereas poetry (as in any language) is more challenging, especially poetry written in northern dialects. Beowulf poses its own unique challenges as well.

The manuscript we have of Beowulf is mainly in West Saxon, though this only tells us that the two scribes whose hands it is in were from Wessex, not that the original composition was in this dialect. In fact, there are some indications that the poem was composed originally in an Anglian dialect from the north (Northumbrian or Mercian). Namely, there are words in the poem written their northern forms rather than their West Saxon forms. In some cases this may be simply a matter of using standard poetical terms and forms, which were originally northern. But we also see northern forms surviving in cases when a West Saxon poet would have used the form of his own dialect. Here are some examples:

• waldend instead of West Saxon wealdend 'Ruler/God'
• sægon for WS sawon 'saw'
• cwóm(on) for WS cóm(on) 'came'
• verbal prefix in- instead of WS on-, e.g. inhaétan 'inflame'
• mid 'with' with the accusative case, whereas it only takes the dative or instrumental in WS texts.

The northern dialects didn't tend to have as many vocalic diphthongs as West Saxon, as we see in the first example. Also, the northern dialects had more Viking influence in pronunciation and vocabulary. Thus where West Saxon has cuman 'to come', it was pronounced cyman in the north. If you think about the sound of many modern Scottish and Northern English accents, you realize they do the same thing with the 'u' sound today. Both there, and in modern Scandinavian languages, the 'u' tends to sound like 'y' (that is, like German 'ü'), whereas the 'u' sound is now spelled with 'o'. (Compare English's use of double 'oo'.)

Incidentally, in The Lord of the Rings, it is the Mercian dialect that Tolkien has the Riders of Rohan speaking. In fact, the name of their land, the Riddermark or the Mark, was intended to recall (at least to himself, if no one else) its connection with the name of Mercia. The form Riddermark, land of the riders, has the same form as, e.g., Denmark, land of the Danes.

Hope that wasn't too much information! *s*