A data feed is a file that enables affiliates to create a database driven site that features the products for a given merchant.
There are a lot of different fields in that file. Typical fields are the product description, image, link to the product, etc.
It’s a tool for affiliates to create a robust, database driven site, like a comparison shopping site.
As far as the difference between dynamic and static data feeds, the static data feeds, as implied by the name, are not updated.
This is not a workable solution for any merchant that updates their inventory with any regularity.
On the other hand, a dynamic data feed is frequently updated to reflect changes in inventory, pricing, etc.