The range in decibels between the peak value of a signal and the noise floor.  Generally, the larger the dynamic range of a system, the better.  In the case of digital signals, the dynamic range can be increased by increasing the quantization level (the bits per sample).  For this reason, DVD-Audio, which allows for a quantization level of 24 bits per sample, has a greater dynamic range than CD-Audio, which uses a quantization level of 16 bits per sample.