NB: This module duplicates the functionality of image_resize_filter. Please use that instead.
Dynamic image styles is a filter module that will resize images server side to match the size they'll be displayed in the browser. This is done by reading the width and height attributes from each image tag in the content, and then creating (or reusing) an image style with those dimensions to style the image.
Why do this? WYSIWYG editors commonly let users resize images for display, but this still sends the large original to anyone viewing the content - wasting their time and bandwidth. If you've got a content producer sticking many photos in a page straight from their camera, they could easily make something that weighs in in the tens of megabytes without realising. This filter takes the work out of resizing images, and aims to be totally transparent to the end user - they drag the image to resize in their editor, and that's the size that gets sent to the browser.
This module is Drupal 7 only, due to the dependency on image styles.