When most web types talk about 'on-the-fly' page generation, they just mean that the page is built from a number of elements, usually pulled from a database specifically for the person making the request for that page.

Almost every page you write with some PHP in it can be considered to be generated 'on-the-fly'. A good example would be a basic page containing a news story. The client calls the page with the URL news.php?id=10. Your server goes to the news.php page, runs an SQL query and pulls the news story in from the database, inserts it into the middle of some HTML and returns that page to the client.