I think it's worth mentioning that 'dynamic' means changing over time - it doesn't just mean changes in volume.
For instance, with a clean guitar if you hit the strings lightly you get a different sound than you do if you smack them as hard as you can. If you record a piece with both of those styles and then compress it, you can even out the volume perfectly but it will still feel dynamic because of the difference in sound. That principle applies to lots of things - with distorted guitars there's an obvious dynamic difference between alternate picking and playing all down strokes that comes from sound more than volume.
Referring to your comment about mastering, keeping the dynamics even doesn't make things sound louder - if anything it makes them need to be louder overall because of the lack of dynamics. If you make the verses slightly quieter than the chorus, the impact of the chorus will be far greater and means the overall volume doesn't need to be pushed so much - that's pretty much the principle behind Nirvana's entire career.
Steve