A DynamicModifier is just a way to create ModifierTypes, which is nothing more than an EffectType with a certain scope (called a "CollectionType"). In other words, it takes whatever Effect and determines whether it applies to a Player, a City, a Unit, All Units, All Players, Just Cities Owned by this Player, etc.
I don't know why they call it a DynamicModifier TBH. A better name for this table would be "ModifierTypes" because that is really all that it does. Just creates a definition for a ModifierType that you can then use in the Modifiers table.