How Does Dynamic Content Work?

In episode 320 of our weekly Hump Day Hangouts (https://www.youtube.com/watch?v=CUDpL_KEbp4), one participant asked how does a dynamic content work.

The exact question was:

How does dynamic content work? I have a client that ranks for multiple locations using content from a .net database to feed the respective location fields and the page content dynamically, pages are .aspx . At he bottom of the homepage they have listed about 60 locations. When you click on a city the database fills out the appropriate content. EVERY single page looks like duplicate content, except for the location content, however this website is not getting penalized with duplicate content, and ranking for a lot of locations, why?

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