High dynamic range (HDR) images enable photographers to record a greater range of tonal detail than a given camera could capture in a single photo. This opens up a whole new set of lighting possibilities which one might have previously avoided—for purely technical reasons. The new "merge to HDR" feature of Photoshop CS2 allows the photographer to combine a series of bracketed exposures into a single image which encompasses the tonal detail of the entire series.
Dynamic range in photography describes the ratio between the maximum and minimum measurable light intensities (white and black, respectively). In the real world, one never encounters true white or black-- only varying degrees of light source intensity and subject reflectivity. Therefore the concept of dynamic range becomes more complicated, and depends on whether you are describing a capture device (such as a camera or scanner), a display device (such as a print or computer display), or the subject itself.