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The term "dynamic virtual host" is a fairly simple concept that is surprisingly hard to describe. There are a few related ideas that will have to be explained first in order to create a clear picture of the concept.

One of the most economical forms of hosting for small-scale applications is virtual hosting, which is a deviation from the normal hosting setup. The Internet usually assumes that a given IP address represents a simple, isolated machine. In this ideal setup, every website on the Internet would require its own machine and its own IP address. Such a system would create two problems: each website would require a lot of hardware and each site would eat up an IP address. Virtual hosting consolidates the use of resources by making it possible for a single server, and often a single IP address, to maintain different domains and web sites.

On the server side of the operation, each machine is partitioned so that the data corresponding to multiple domains and websites are stored on one system. Sometimes the server operating system will associate each partition with a specific network adapter so that each domain will be able to have its own IP address (as in IP-based virtual hosting). An even cheaper method is to make each partition accessible through as single network adapter and IP address by having connection requests include the IP address and the hostname (name-based virtual hosting).

Traditionally, and in the most reliable setups, the IP address involved will be static, which is to say the machine always uses the same IP address. The difference in the case of a dynamic virtual host is that the server software used to maintain the system is designed to dynamically configure the necessary connections. The advantage of this kind of server implementation is that it will automatically assign IP address to resources that require them. This makes the setup process, in some ways, much simpler and it also allows different IP-based functions to be activated without restarting the server or manually entering IP addresses.

The difficulty is that, if you want to host webpages on such a server, the software will also need the capability to update a DNS server with the relevant IP addresses as they change and every time they change. Changes in the IP address assigned to a domain can potentially make resources difficult to find until DNS servers that have cached the old IP address are updated or reset.

The main advantage of a dynamic virtual host is that it simplifies the administration of servers that typically run many temporary IP-based applications that would otherwise each require complicated setup procedures. There is a certain plug-and-play quality to the functionality to a dynamically configured virtual host that makes them attractive in certain circumstances.