A dynamic-link library (DLL) is an executable file that acts as a shared library of functions. Dynamic linking provides a way for a process to call a function that is not part of its executable code. The executable code for the function is located in a DLL, which contains one or more functions that are compiled, linked, and stored separately from the processes that use them. DLLs also facilitate the sharing of data and resources. Multiple applications can simultaneously access the contents of a single copy of a DLL in memory.
Dynamic linking differs from static linking in that it allows an executable module (either a .dll or .exe file) to include only the information needed at run time to locate the executable code for a DLL function. In static linking, the linker gets all of the referenced functions from the static link library and places it with your code into your executable.
Using dynamic linking instead of static linking offers several advantages. DLLs save memory, reduce swapping, save disk space, upgrade easier, provide after-market support, provide a mechanism to extend the MFC library classes, support multilanguage programs, and ease the creation of international versions.
In case of free software licenses also, there are provisions with LGPL, using which you dont have to share the code which are linked dynamically.
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