Dysplastic nodules are defined as distinctive liver nodules that differ in size, color, texture or protrusion compared to the surrounding liver tissue, and contain portal tracts. Low grade dysplastic nodules show normal or enlarged hepatocytes without architectural abnormalities, while high grade nodules exhibit cytological and architectural atypia such as small cell changes and pseudogland formation. The document discusses models of dysplastic nodule development and differentiation from hepatocellular carcinoma.