Dynamic LOD - while optional was the primary reason for the creation and name of DynDOLOD - is a new type of LOD for objects that change their visual state based on distance to the player and their quests status like military tents or ships. In addition it supports animated objects like waterfalls or fires or glow LOD windows that react to weather/sunlight.
Dynamic LOD uses references that are so called neverfades - they are persistent and have the Is Full LOD flag set. Usually these references are always active and enabled regardless of the distance to the player. Dynamic LOD enables or disables these references depending on the distance to the player for better performance and less resource usage, e.g. dynamic LOD references.
The distant LOD area starts beyond the currently active exterior cells, the so called uGridsToLoad. The distant LOD area contains of terrain LOD, object LOD, tree LOD and the dynamic LOD references. In case of Skyrim Special Edition and Skyrim VR there can also be so called large references, a system that pushes the distance of the LOD to full model transition a few cells further out. Unfortunately the large reference system has a few visual bugs, which become really apparent when plugins are made by unaware mod authors.
Dynamic LOD uses two distances, the so called NearGrid and FarGrid to control the visibility (enable state) of the dynamic LOD references. The size of the grids can be set on the advanced mode settings. The larger the grids, the further away dynamic LOD shows at the expense of exponential performance/resource usage. They can not be changed in the game.
Dynamic LOD references can use object LOD models, full models and also so called dynamic LOD models which can contain animations and other features supported by full models only, while at the same time being optimized similar to an object LOD model.
In the Skyrim version, the NearGrid and FarGrid start right beyond the uGridsToLoad. In Skyrim Special Edition / Skyrim VR the FarGrid starts beyond the uLargeRefLODGridSize, while the NearGrid still starts beyond the uGridsToLoad.
This means that for a worldspace which has any large references, the dynamic LOD for a large reference is always assigned to FarGrid, while dynamic LOD for normal reference is always assigned to the NearGrid. Consequently this will overwrite mesh rules grid settings automatically on a per reference basis as needed. If the worldspace has no large references, the grid settings are used as intended.
For example, a mesh rule might define "Far LOD" or "Far Full" for a mesh in case it needs to be dynamic LOD. If the reference using this mesh is not a large reference, it will automatically assigned to the NearGrid.
For dynamic LOD to work correctly with the large reference system of Skyrim Special Edition or Skyrim VR, the Large References Fix setting in the DynDOLOD SkyUI MCM Main page needs to be checked or unchecked depending on the large reference distance setting. See DynDOLOD SkyUI MCM for details.