Dynamic Mics-
Uses electromagnetic induction to generate an output signal (the signal going into your preamp).
A dynamic mic usually has a thick Mylar diaphram with a core of wire attatched to it. Whenever acoustic pressure (singing into the mic) hits the diaphram, the coil is displaced in the magnetic field in proportion to the amplitude and frequency of the wave, making the coil move across lines of magnetic flux that's is given by the magnet. This sends the electrical signal through the coil and out the output leads.
Condesner Mics-
Use electrostatic principles instead of electromagnetic. The capsule usually consists of two plates, one movable diaphram and one fixed. The plates form a capacitor, which stores the electric charge. The mic needs Phantom Power (+48v) which provides a charge for the capacitor.
In laymans terms, when you talk into the mic, the capsule expands and collapses, and that causes the signal to get send out of the mic.