Dynamic programming is an algorithm design technique that solves problems by breaking them down into smaller overlapping subproblems and storing the results of already solved subproblems, rather than recomputing them. It is applicable to problems exhibiting optimal substructure and overlapping subproblems. The key steps are to define the optimal substructure, recursively define the optimal solution value, compute values bottom-up, and optionally reconstruct the optimal solution. Common examples that can be solved with dynamic programming include knapsack, shortest paths, matrix chain multiplication, and longest common subsequence.