Hey Justin,
The dynamic feature tiles are the way features are delivered from online hosted feature services to the browser. Think of it as an optimized way of delivering data from a feature service to the client. The features in the query responses are tiled so they can be cached in the browser and in the CDN and server. The "dynamic" nature of it refers to the fact that you can 1.) dynamically interact with your features (they aren't part of an image, or some other vector tile. They are true features with all the geometries and attributes you expect from a feature service) and 2.) When you edit a feature, any tiles that feature was a part of will be discarded and a new cache created the next time a request response includes the new feature.
In short, there's no configuration or pre-cooking involved with dynamic feature tiles. It all comes out of the box when you host feature services in ArcGIS Online.
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