Apoorvi Kapoor has a detailed post on CRM Team Blog about how dynamic marketing lists work in CRM 2011. A snapshot of the dynamic list can be saved anytime using the Copy to Static button in the toolbar.
The biggest challenge in CRM 4.0 for a Marketing manager was to keep the marketing list updated with new records in the system. This is a time consuming and repetitive process which manifests more in case there are a large number of members to be added. Here is when Dynamic Marketing list comes for your rescue.