Wikipedia
In a dynamic microphone a small movable induction coil, positioned in the magnetic field of a permanent magnet, is attached to the diaphragm. When sound enters through the windscreen of the microphone, the sound wave vibrations move the diaphragm, When the diaphragm vibrates, the coil moves in the magnetic field, producing a varying current in the coil (See electromagnetic induction). The principle is exactly the same as in a loudspeaker, only reversed. Dynamic microphones are robust, relatively inexpensive, and resistant to moisture, and for this reason they are widely used on-stage by singers. They tend to have a poor low-frequency response, which is advantageous for reducing handling noise as a vocal mic, but tends to exclude them from other uses.

In a capacitor microphone, also known as a condenser microphone, the diaphragm acts as one plate of a capacitor, and the vibrations produce changes in the distance between the plates. Since the plates are biased with a fixed charge (Q), the voltage maintained across the capacitor plates changes with the vibrations in the air, according to the capacitance equation:

Q = C * V

where Q = charge in coulombs, C = capacitance in farads and V = potential difference in volts. The capacitance of the plates is inversely proportional to the distance between them for a parallel-plate capacitor. (See capacitance for details.):

C x A/d

Capacitor microphones can be expensive and require a power supply, commonly provided from mic inputs as phantom power, but give a high-quality sound signal and are now the preferred choice in laboratory and studio recording applications.