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See also Dynamic vs Static IP Addresses

What is an dynamic IP address?

Dynamic IP addresses are most frequently assigned on LANs and broadband networks by Dynamic Host Configuration Protocol (DHCP) servers. They are used because it avoids the administrative burden of assigning specific static addresses to each device on a network. It also allows many devices to share limited address space on a network if only some of them will be online at a particular time. In most current desktop operating systems, dynamic IP configuration is enabled by default so that a user does not need to manually enter any settings to connect to a network with a DHCP server. DHCP is not the only technology used to assigning dynamic IP addresses. Dialup and some broadband networks use dynamic address features of the Point-to-Point Protocol.

How it's working. A dynamically allocated IP address is an address made available to all registered users upon request. When you are configured to use DHCP, your machine sends a request to the DHCP server for an IP address each time it is booted. If your machine is registered, the DCHP server responds by providing an IP address and other configuration addresses such as Gateway and DNS.
When registering for a dynamic IP address, the address you receive from the DHCP server is taken from a pool of IP addresses. Each time your computer requests an IP address from the DHCP server, it will be allocated an available address from the dynamic address pool. This address may be different each time your computer is started or if you release and renew your current IP address.

What is an dynamic IP address (for begginers)?

Requesting DHCP computers receive a dynamic IP address (think temporary phone number) for the duration of that Internet session or for some other specified amount of time. Once the user disconnects from the Internet, their dynamic IP address goes back into the IP address pool so it can be assigned to another user. Even if the user reconnects immediately, odds are they will not be assigned the same IP address from the pool. To keep our telephone telephone analogy going, using a dynamic IP address is similar to using a pay phone. Unless there is a reason to receive a call, the user does not care what number he or she is calling from. There are times, however, when users who connect to the Internet using dynamic IP wish to allow other computers to locate them.

Virtual IP address

Virtual IP address (VIP or VIPA) is an IP address that is not connected to a specific computer or network interface card (NIC) on a computer. Incoming packets are sent to the VIP address, but all packets travel through real network interfaces. VIPs are mostly used for connection redundancy; a VIP address may still be available if a computer or NIC fails because an alternative computer or NIC replies to connections.

Sticky dynamic IP address

A sticky dynamic IP address or sticky IP is a term created by cable and DSL users to describe a dynamically assigned IP address that does not change often. This is however an informal term, as a sticky IP does not differ in any way from other dynamic IP address. Even though IP addresses may not change often for cable or DSL users, the addresses are still controlled by the standard DHCP process. Since the modems are often online for extended periods of time, the leases on the IP addresses are commonly renewed, and therefore may not change.