Dynamic volume is a handy device for taming the dynamic range of your source material. Its use is more dependent on you and your environment than on the type of device you are using (cable, blu-ray, etc.)
If you want to crank up your system to get the full impact of a movie sound track and you have no neighbors who will complain, by all means, crank up the volume and turn dynamic volume off.
If you want to watch the same movie and you have a sleeping baby or wife in the next room, turn the volume down and turn dynamic volume to midnight. The other two dynamic volume options are compromises between the first two extremes.
Hope that helps,