Dynamic query option allows you to select the criteria for your objects once and those objects are dynamically aggregated after that for your reports.
You can apply filters on all dynamically sourced fields in your object (including custom fields and fields in the templates) instead of manually adding each object.
Dynamic query based report building provides flexibility and ease, since the filters that you select can have the corresponding result set expanded or contracted as objects are created, updated, or archived.
Dynamic query is currently possible in Sales Plan; Solutions; and Funding Reports.
In List Based reports, you have to explicitly select the exact object for which you want to run the report. For example, if you want to see the opportunities in a newly added sales plan, you have to add the new sales plan in your opportunities report.