A Dynamic list is a list that is connected to the original list when it was created. When the original list changes the Dynamic list will also change. This is due to the arguments that were set up. The dynamic part is that you can choose to add items to the list without informing anything that is referencing it.
This means that instead of creating one template for each potential element in your list, you can create a single template for the list itself. Additionally if you ever choose to add to the list for any reason, you won't have to amend the template.