SSI (Server-Side Includes) lets a web server stitch a fragment into a response at request time, e.g. via Apache's mod_include. ESI (Edge-Side Includes) does the same thing one hop earlier, at a CDN or reverse-proxy cache in front of the origin.
Sling ships org.apache.sling.dynamicinclude, which rewrites <sling:include> tags into SSI or ESI markup so a cache in front of Sling can assemble the page while still caching the surrounding, mostly-static shell.
Without dynamic includes, a single personalized fragment (a login widget, a cart count) forces the whole page to bypass the cache. With SSI/ESI, the cache serves the static shell straight from cache and only asks the origin for the small dynamic fragment — the same trade-off this project's own webcache layer (see devops/webcache.md) is built around.