Currently, using a dynamic melody means that bards will sing based on a priority system in combat, attempting to keep up high-priority songs over singing those farther down the list. Unchecking the box, in combat, the bard will go directly down the list. Furthermore, there are a couple small bugs that could stand to be worked out on that, but...
I say currently, because there is a bard revamp in the works (that will likely enter a special or beta test phase very soon), and the dynamic will be the only method.
I recommend keeping this option checked for now.