Dynamic scoping means that variable lookups occur in the scope where a function is called, not where it is defined.

$ x=3
$ func1 () { echo "in func1: $x"; }
$ func2 () { local x=9; func1; }
$ func2
in func1: 9
$ func1
in func1: 3

In a lexically scoped language, func1 would always look in the global scope for the value of x, because func1 is defined in the local scope.

In a dynamically scoped language, func1 looks in the scope where it is called. When it is called from within func2, it first looks in the body of func2 for a value of x. If it weren't defined there, it would look in the global scope, where func2 was called from.