Dynamic headphones use a driver that is a miniature speaker, whereas the armature type of headphone uses a driver such as is used in hearing aids.
What is more important than the type of driver is the implementation.
Both armature and dynamic drivers can sound both very good as well as very bad.
Armature drivers are used primarily in IEMs. Dynamic and electrostatic drivers are more commonly used in circumaural phones. Some IEMs, such as the Atrios use dynamic drivers, but they tend to be a bit larger in size.
I'd like to see a transition to the use of moving-coil as the standard nomenclature, I think that I did the edits on the wikipedia page to make that change. But then I'd also like companies to stop saying their headphones are digital.
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