Panoramas are created by 'stitching' together a set of photos to create a much larger image. Unfortunately panoramas are usually far too big to fit in a window.
Traditional panoramas are streteched flat and don't take into account the curvature of the earth or position of the horizon and can lack perspective. They often don't take the focal length of the camera lense into account either. The image can appear distorted.
When Dynamic Panorama Photos are created, the image is modified to take things like that into account. These Panoramas can be panned, zoomed and explored using a mouse.
Dynamic Panoramas are usually cylindrical and may be spherical, giving a very real sense of being there.