This is dynamic as in dynamo.
The dynamo is a device for converting rotational motion into an electric current and consists of a coil of wire that rotates inside the field of a magnet. Re-configure these components and you have a coil of wire attached to a thin, lightweight diaphragm that vibrates in response to sound.
The coil in turn vibrates within the field of the magnet and a signal is generated in proportion to the acoustic vibration the mic receives.
The dynamic mic is also sometimes known as the moving coil mic, since it is always the coil that moves, not the magnet - even though that would be possible.
The dynamic mic produces a signal that is healthy in both voltage and current. Remember that it is possible to exchange voltage for current, and vice versa, using a transformer.
All professional dynamic mics incorporate a transformer that gives them an output impedance of somewhere around 200 ohms.
This is a fairly low output impedance that can drive a cable of 100 meters or perhaps even more with little loss of high frequency signal (the resistance of a cable attenuates all frequencies equally, the capacitance of a cable provides a path between signal conductor and earth conductor through which high frequencies can leak).
It is not necessary therefore to have a preamplifier close to the microphone, neither does the mic need any power to operate. Examples of dynamic mics are the famous Shure SM58 and the Electrovoice RE20. The characteristics of the dynamic mic are primarily determined by the weight of the coil slowing down the response of the diaphragm.
The sound can be good, particularly on drums, but it is not as crisp and clear as it would have to be to capture delicate sounds with complete accuracy.
Dynamic microphones have always been noted for providing good value for money, but other types are now starting to challenge them on these grounds.