As it turns out, Spider-Man has a hand in turning Dillon into Electro. Not directly, of course, but it's that simple act of kindness that helps drive Electro's actions once he stumbles into Times Square. Electro is upset that Peter doesn't initially recognize him (first calling him "Sparkles" before forgetting his actual name), which prompts what appears to be a destructive battle. We also see how Electro gets his powers; by getting electrocuted and falling into a vat of electric eels at Oscorp (continuing the Spider-Man tradition of animal-based bad guys.) Later we see that he gets some kind of high-tech suit, probably from Norman Osborn, that most likely helps him harness and unleash his abilities.