Dynamic blocks were introduced into AutoCAD around about the 2005 mark. These are very handy when you are inserting a pipe and you need it to lengthen just by dragging the end instead of using the stretch command. They can also be used to have many different blocks sitting in the one block, like the car example in your Tool Palettes.
Creating blocks consists of 3 different parts. Creating the geometry for the block, Inserting the geometric and dimensional constraints (if applicable) and then creating parameters and actions for those parameters to turn the static block into a functioning dynamic block.
The Geometric and Dimensional Constraints can be accessed either through the parametric tab or in the block editor.
The geometric constraints are applied to different lines, arcs and circles to take away their degrees of freedom so that you will end up with a rigid object.
For example with the perpendicular constraint you will tell 2 lines that they always have to be 90 degrees to each other and for the concentric constraint you will tell 2 circles or arcs to share the same centre point.
You also have dimensional constraints. These are dimensions that drive the geometry that it is attached to. For instance you can control the length of the line by changing the dimension. In traditional 2D CAD it works the other way round. The geometry drives the dimension.
Lastly, in the Block Editor, you will assign your Parameters and Actions to the objects you have drawn to turn the static block into a dynamic block.
They have made it very straight forward with which parameter gets paired with which action so we should be able to get up and running very quickly.