A dynamic equilibrium occurs when two reversible processes proceed at the same rate. A reversible chemical reaction will be at dynamic equilibrium when the rate of forward reaction is equal to the rate of the reverse reaction. Whilst at dynamic equilibrium there is no change in the concentration of either the forward or reverse reactions. The word dynamic indicates that at equilibrium both the forward and reverse chemical reactions still occur rather than the reaction halting once equilibrium is reached.
An example of dynamic equilibrium, for a closed and partially filled water bottle water will evaporate from the surface of the water and the air in the bottle will begin to become saturated with water vapor. Eventually, the air will be completely saturated with water vapor, this water will then condense as its molecules collide with the surface of the water. When the rate of evaporation is equal to the rate of condensation the system is at dynamic equilibrium.
The concept of dynamic equilibrium is not limited to simple changes of state such as that described above. It is often applied to the analysis of chemical reaction kinetics, to obtain useful information about the ratios of reactants and products which will form at equilibrium. It should be noted that at equilibrium the concentrations of the reactants and the concentrations of the products are constant.
The term also has applications across a wide range of disciplines. While it may be applied to less physical systems in these fields, it still relates to a stable situation maintained by balancing processes. For example: in economics it may be used to refer to the constant flux of capital in otherwise stable markets; in ecology, an unchanging population of organisms results from the balancing of birth rate against death rate.
This term can also be used to refer to a steady state (i.e., a state which isn't a true equilibrium, but does not change with time). This can only happen if the system is in contact with an environment which is not in equilibrium. A prime example is that of most stars - nuclear fusion provides an outward pressure to counteract the pressure of gravity, but neither the fusion continually produces energy, and the environment external to the star is certainly not in equilibrium, either.