Think of it like this:
You have a bank dedicated to a system (your local PD/FD/EMS/Gov). In this bank you have 20 available channels. Say you only use 8. You don't want to "clutter up" this system, so you leave the other 12 channels empty. In bank 2, you have your county services setup, using only a handful of channels.
Bank 1:
Ch 1-PD-1
Ch 2-PD-2
Ch 3-PD CAR-CAR
Ch 4-FD-1
Ch 5-FD-2
Ch 6-Fireground
Ch 7-EMS-1
Ch 8-Local Government
Ch 9 through 20 are empty.
Bank 2:
Ch 21-County Sheriff
Ch 22-Sheriff Car-Car
Ch 23-County Fire
Ch 24-County EMS
Ch 25-40 are empty.
Now, with dynamic memory, you're not limited by the number of channels in a bank you can have as many or as few as you want (actually, with certain scanners (BCD396T) you are limited-it's 200 TGIDs for trunked systems, but that's irrelevant for the sake of this explanation). You can have a system with multiple groups in it.
SYSTEM 1-ANYTOWN, USA
Group-1 POLICE
Ch-1 PD-1
Ch-2 PD-2
Ch-3 PD Car-Car
Group-2 FIRE DEPT
Ch-1 FD-1
Ch-2 FD-2
Ch-3 Fireground
Group-3 OTHER CITY SVCS
Ch-1 EMS
Ch-2 Local Gov
SYSTEM 2-COUNTY
Group-1 SHERIFF
Ch-1 DISPATCH
Ch-2 CAR-CAR
Group-2 FIRE
Ch-1 DISPATCH
Group-3 EMS
Ch-1 DISPATCH
Dynamic memory allows for a more efficient setup of a scanner, both in terms of the "how" you set it up, and the scanner resources used.
Hope that this helps and doesn't confuse you too much.
Steve