
Dynamic microphones function differently than condenser microphones. Both have a diaphragm, which is a thin, flat surface that vibrates in response to sound waves of many frequencies. The two types of mics differ though in the way the diaphragm turns that mechanical motion into an electrical signal. These mechanical and electrical differences translate into differences in the way people use them as well.
Dynamic Microphones
A dynamic microphone works very much like a sound speaker but in reverse. Sound hits the diaphragm, which is attached to a metal coil. The sound vibration pushes and pulls on the diaphragm, which causes the metal coil to move back and forth over a magnet. As the coil moves over the magnet, it generates electricity. Since the dynamic microphone is generating its own electric signal, no additional power is needed.
Condenser Microphones
A condenser mic also has a diaphragm, but it is usually a thin film placed very closely next to an electrically charged metal plate. As the diaphragm moves back and forth, it changes the capacitance of the circuit, which generates an electrical audio signal.
As you might have guessed, the charged metal plate requires power, so most condenser microphones require some sort of power to charge that plate. This is typically supplied by 48v "phantom power" from a mixer or mic preamp.
Pros and Cons
Dynamic microphones don't require any power, so they can be used in more situations than a condenser mic can. Because of the way they're built, they also tend to be more rugged and can handle louder sounds without distorting.
On the other hand, they tend to have a lower output than condensers, which might require more amplification (and potentially create more noise). Also, these mics don't typically respond to higher frequencies as well as condenser mics.
Condenser mics usually have a very even frequency response, which makes them suitable for recording a wide range of vocals and instruments, capturing the high frequencies successfully. They also tend to be more sensitive than dynamic mics and can record quieter sounds without adding excessive noise.
Condenser mics can be a little more "fussy" in that they require power from an external source to function. If your preamp doesn't provide phantom power, you can't use the mic. Also, because these mics are generally more sensitive, they are prone to overloading and distortion at high sound levels.
Different Uses
Dynamic mics tend to be more popular on stage because of their durability and ability to withstand high decibels without distorting. They almost always have cardioid or supercardioid polar patterns as well, which means they reject sounds coming from the sides and the back. This reduces sound bleeding in from other sources and also cuts down on feedback. Vocalist, drums and guitar amps frequently find themselves in front of dynamic microphones.
Condenser mics are also used for vocal recording, but often are found in a studio setting. These mics can record very detailed, intimate vocal tracks with the precise frequency response. Strings, acoustic guitar and other, un-amplified instruments often sound best with a condenser microphone. Condenser mics come in all sorts of polar patterns, from cardioid to omnidirectional to figure-eight.
Podcasters and broadcasters use either type of microphone. One of the most popular broadcast microphones is the Shure SM7B, which is a dynamic mic with a lot of proximity effect and low output that requires significant amplification. And yet USB-powered condenser microphones are ubiquitous for the direct-to-computer podcast recorder.
Both types of mics find their way into all sorts of recording situations, so it's impossible to say that one type of mic is the perfect match for a given situation. Hopefully, knowing the different characteristics of these categories will help you narrow down your search for the right mic!