Based on my 60 seconds reading on it, onboard GPUs typically share the systems RAM. It is usually a fixed amount from my understanding. Dynamic caching seems to allow the GPU to only consume what it needs. Without knowing more, I'm guessing this means it frees up more RAM for the system instead of holding a fixed chunk in reserve for the GPU, or, on the other side, allows the GPU to use more RAM than some predetermined fixed amount.

According to Apple's press release, the GPUs in the new Macs are already faster and more efficient than those that came before them. But they go further thanks to their support for Dynamic Caching, a feature that "unlike traditional GPUs, allocates the use of local memory in hardware in real time."

What does that mean? Apple says that "with Dynamic Caching, only the exact amount of memory needed is used for each task. This is an industry first, transparent to developers, and the cornerstone of the new GPU architecture."

https://www.imore.com/mac/dynamic-caching-and-its-m3-chips-could-be-the-secret-to-apples-mac-gaming-plans