With Prefab Events, you need to create an original event inside the template map. In contrast, a Dynamic Event can be created with just a single plugin command, without any other requirements.
However, with a dynamic event, you cannot assign it a spritesheet or any commands beyond giving it a name, some notetags, and comments. A Dynamic Event can also delete itself after a certain amount of time.
Use case: Create a hitbox event that exists for only 3 frames.