Definition
A dynamic IP is one that is not permanently bound to a specific device or account. ISPs hand out dynamic IPs from a pool, often via DHCP, and reassign them periodically — sometimes on every reboot of the home router, sometimes on a fixed lease schedule of a few hours or days. Dynamic addressing exists for technical reasons (efficient use of a finite IPv4 space) and for commercial reasons (a static IP is usually a paid upgrade).
Dynamic IPs and VPNs
When you use a VPN, your perceived IP — the one that websites see — is the VPN server's IP. From the website's perspective, this IP is dynamic in a different sense: many users hop on and off it throughout the day, and your specific connection might be assigned a different shared IP on each reconnect. From your home network's perspective, your real IP also remains dynamic and is hidden behind the VPN regardless.
Implications for Tracking
Dynamic IPs make pure IP-based tracking unreliable, which is one reason advertising and tracking systems shifted to cookies, browser fingerprinting, and account-based identifiers. A dynamic IP is not a privacy feature on its own, but it does mean that a single IP-based ban is usually short-lived: reconnecting often produces a fresh address.