Dynamic binding, also known as late binding or runtime polymorphism, refers to the process in which the determination of which function or method to invoke is made during the program's execution, rather than at compile time. It enables the selection of the appropriate function implementation based on the actual object type or instance involved in the call.

In C++, dynamic binding is primarily achieved through the use of virtual functions and inheritance. When a base class contains virtual functions, and these functions are overridden in derived classes, the decision of which function to call is deferred until runtime.

Here's an example to illustrate dynamic binding:

```cpp
#include <iostream>

class Shape {
public:
    // Virtual function
    virtual void draw() {
        std::cout << "Drawing a shape." << std::endl;
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