I read somewhere that Toady might one day add explosions the game mechanics of Dwarf Fortress. This would be likely be related to the development of gunpowder, but there's another, dwarfier substance that also explodes, Ethanol, or as we've come to call it, booze. Most alcoholic beverages contain water, but in pure form, ethanol is very explody. The more times an alcoholic beverage is distilled, the higher its alcohol content becomes, eventually reaching a point where it can explode.
Some very energetic ethanol reactions:
https://www.youtube.com/watch?v=zTwz6FGobCA You can imagine some medieval peasants screaming "witchcraft!"
Now, unfortunately, I'm not well versed in the field of historical chemistry, so I don't know how high a proof could be distilled with pre 1400 technology. Some of these proposals may be completely anachronistic. With a little modern knowledge, we know that explosives like ethanol can be used for many things:
Explosives: First of all, simply let the thing explode. This creates a shockwave in all directions, and in the case of ethanol, would probably result in flames as well. The explosion could be combined with a shrapnel creating shell to make a grenade.
Incendiaries: Ethanol is very flammable and could simply be lit on fire. Fire breathers in circus acts use or used ethanol to make flames. Or dwarves (or sieges) could tie an ethanol soaked cloth to an arrow and light it on fire before shooting.
Cannons: Ethanol does not have the explosive power of gunpowder, but could nonetheless be used to propel objects like a cannon does. This is also a little more complicated for ethanol because ethanol is not a solid, it would require a complicated loading mechanism.
Rockets: Similar idea to cannons, an ethanol explosion could be used to propel the object containing the explosion. Modern humans build recreational ethanol rockets out of plastic bottles, however, I don't know if there would be a suitable substance that dwarves could use. Possibly glass, though even that might be too heavy.
Engines: Ethanol can do almost anything that gasoline can do, in fact the Model T was designed to run on either gasoline or ethanol. In Dwarf Fortress, you might be able to make an ethanol power source instead of water wheels or windmills.
Fuel: Finally, ethanol could simply be used to heat things up, like charcoal. Admittedly, this is more complicated than using solid fuel.
Ethanol powered tools would need to be built differently than gunpowder based tools, because ethanol explosions rely on stoichiometry, mixing ethanol fuels with atmospheric oxygen. I'm not prepared to explain how this works, but if you've seen Mythbusters, there are a lot of experiments that rely on proper stoichiometric ratios to work.
This proposal should have more scientific backing than I can muster before taking off.