There are actually three different types of dynamos, or generator systems, commonly used in bicycles. Each has it's advantages and disadvantages, which means being informed will allow you to make the best decision for you and your bicycle.

Hub Dynamos
This type of generator is actually attached to the hub of a bicycle wheel, meaning that it won't be in the way as you are pedaling your bicycle. Hub dynamos are the most popular type of bicycle generator, for many reasons. These generators are generally quiet and provide great service for up to 5,000 kilometers. There are some myths regarding the hub generator however. One of those myths is that if you pedal your bike too fast that the generator will blow up. Fortunately this myth is completely untrue. This kind of error did take place with systems built in the 1920s, but since then the system has vastly improved.

Bottle Dynamos
Bottle dynamos attach to the spokes of your bicycle tires and are powered by pedaling. These generators are readily available and the cheapest of the three dynamo systems. There are some drawbacks to this kind of system, however. Users complain that the generator will slip and cause errors with the bicycle and lights. Newer systems help to prevent this slippage and bottle dynamos are again gaining popularity.

Bottom Bracket Dynamos
One of the easiest systems to install, bottom bracket dynamos are placed between the chainstays of the bottom bracket and in no way interfere with pedaling or your tires. Again, the pedaling and rotation of the tires powers the generator.

Advantages of Using a Dynamo System
Using a generator or dynamo system is a lot more reliable than using battery operated lights. You will be able to use the generator for hours upon hours without losing power. Another advantage of using a generator is that they are very environmentally friendly, emitting no pollution. These are also great for riding during the night because generators take great advantage of the lights used, burning them the brightest as they possible can.

Disadvantages of Dynamos
There are a few disadvantages related to these generator systems. One of the biggest disadvantages is that if you aren't pedaling, then your lights aren't shining. This could be potentially dangerous when biking at night. Another disadvantage relates to what kind of light bulbs you are using. If you are using halogen light bulbs with a generator, the bulbs don't offer a very long life. Another factor that could be seen as an advantage or disadvantage is the fact that these systems are very difficult to remove. This is handy if you live in an area where vandalism is a problem, but if you are going to be removing your generator often another system might be a better idea for you and your bicycle.