How does a dynamo work?

 The movement of another body is transmitted to a rectangular coil of wire that is inside a U-Shaped magnet. The motion of this coil of wire cuts the magnetic flux in the magnet. Faraday once stated that-Whenever there is a change in magnetic flux linked with a circuit there is an induced current and the strength of this induced current is directly proportional to the rate of magnetic flux-. So according to this rule when the magnet is in motion it is constantly cutting the magnetic flux, and as it does this there is a current that is induced (eddy currents). However a dynamo can either be A.C or D.C according to the brushes and number of commutators used (Flemings Right-hand rule). If we refer back to Faraday's rule it says that the strength of this induced current is directly proportional to the rate of magnetic flux. This rule can be seen practically in a bicycle that has a dynamo. The faster the rider rides the faster the change in magnetic flux and hence the brighter the light

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Dynamo is just the opposite/ reverse action of motor operation.

When a conductor is moved across a magnetic field, there induces an emf (voltage) across conductor terminals so as it opposes the change of flux (Lenz rule).
Dynamo is constructed with a cylindrical permanent magnet (which rotates at the center) amidst windings that we take the voltage output from. when the magnet rotates its flux path changes relative to the windings and across the winding there exists an electro-motive-force as a voltage..