Internal workings of a dynamic microphone.
A dynamic microphone is a microphone that works on the principle of magnetic induction, converting acoustic energy (the energy in sound waves) into an electric signal using a small diaphragm attached to a coil which moves back and forth in a strong magnetic field. The magnetic field causes an electric current to flow through the coil, with a voltage which varies in sympathy with the motion of the diaphragm. In terms of the way it works, a dynamic microphone is basically a loudspeaker in reverse.
Although dynamic microphones can't match the fidelity of condenser microphones (which are used mainly in studios), they're much more rugged and less prone to noise interference, hence their wide use on stage. They're also better suited to handling high volume levels, such as from drums, amplifiers, and rock vocalists. Rather than the flat frequency response of condensers, they tend to have tailored frequency responses for particular applications. They often impart a 'dirty' or 'gritty' sound to the signal. In general, they're most effective when the sound source is close and reasonably loud, and the sound is predominantly bass or mid-range.
Dynamic microphones require no external power or battery to run; however, most need some kind of preamp to boost the signal. Good quality dynamic mics, such as the legendary Shure SM58, can be bought for not much over $100. As a general rule, the more expensive dynamic models have the best sensitivity, the smoothest frequency response, and the most natural sound reproduction.
Use of dynamic mics in the studio
Because there's less extreme top end in an electric-guitar sound coming from an amplifier, the more delicate and expensive condenser mics tend to be not so essential. Sometimes, a condenser mic may be set back in the room to capture different nuances of the cab sound while the dynamic mic catches the up-front direct sound. These signals can then be blended to encapsulate a complete live sound.
Some studio engineers may set up a combination of mics around the different speakers in the cab and compare them while the guitarist plays. They will then choose a blend of two and reverse the phase of one of them to capture a unique, rich texture that one mic alone could not achieve.
As well as this multiple-mics method, recording the sound from an amp can also be as simple as using one mic – such as a Shure SM57 or Sennheiser MD421 – placed directly in front of the best-sounding speaker in the amp or cab. When a good spot has been found, the mic can be placed right up against the grille or a couple of inches away.