By dynamic range we mean the interval, measured in dB (the dB varies depending on the contexts we are dealing with), between an audio signal's lowest and highest values. In nature, sounds have a certain dynamic. A gust of wind has a small dynamic because its highest dB level isn't much greater than the level you'd have in absence of sound. The sound dynamic generated by a hurricane on the other hand, is much wider. I think you get the idea... Moreover, you will always have some background noise, which in a relatively noisy city environment is stated at around 30 dBspl. So, sounds that have a dBspl level which is lower than 30 can be ignored, seeing that they would be covered by background noise and therefore wouldn't really be perceived. Generally speaking we can say that most sounds don't go beyond 100 dBspl and therefore we'll use this value as our SOL reference. However, it sometimes happens that for brief periods of time more intense sounds are produced, let's say of no more than 120dBspl (this value corresponds approximately to the human ear's threshold of pain). On the left hand side of the following figure, we can see a scale with the aforementioned values:
The difference in dB between the SOL and the background noise is called signal to noise ratio (SNR - Signal to Noise Ratio) and provides a measure for how much 'louder' a sound is than the background noise. The dB difference between the maximum value of the dynamic and the SOL is called headroom. The dB sum of the headroom and the SNR gives us the dynamic range (to get a clear picture of these quantities refer to the left hand side of the previous figure). Once these physical values have been defined we can see their electric equivalent on the right hand side of the previous figure. Firstly let's focus our attention on the noise. Any electronic equipment makes some noise (for example the thermal noise of electric devices, or the natural hiss of a magnetic tape). This time, however, we have an electronic noise and therefore it is measured in dBu (voltage) and no longer in dBspl (pressure). We have a background noise level of -66 dBu equivalent to the 30 dBspl background noise. Our SOL, seeing that we want to work with professional gear, shall be +4dBu (equivalent of 100 dBspl) whilst we will set our headroom at 20 dBu in order to keep things realistic.
If we make a few calculations we obtain an SNR level of 70dBu and therefore a dynamic of 90 dBu. With these values, we can be sure to properly reproduce any sound between 30 dBspl and 120 dBspl, in other words, with a 90 dBspl dynamic. If we just think that nightclub tunes get compressed so much that they reach a maximum dynamic of 30 dB, just think how much we could do with 100 dB in our hands.
A good example is when recording an orchestra. In this case we'd be going from very low dBspl values in the parts where only one instrument is playing, to extremely high levels when, for example, all the instruments are playing together in a triumphant crescendo. With 90dBu at your disposal you can record all these different sounds with all their varying intensities and obtain the same high fidelity.
Another example is when recording a song in which the singer might go from an intimate whisper to full voiced singing. Generally one would set up various microphones and the preamplifiers would be set on different SOL levels, each optimized for certain sound intensities. In the mixing phase one would combine the various recorded sections so as to make sure that the sound reproduction of the track is faithful in all its parts.
Perhaps now we have a better understanding of the values in the previous paragraph's table. Greater SOL values, and therefore higher voltage levels, allow greater dynamic because they are further away from the background noise.