The dynamic data system (DDS) is a modeling technique that uses dynamic data in the form of a time series to develop physically meaningful stochastic difference/differential equations. The general mathematical formulation and background of the DDS methodology are given, and the modeling procedure evolved in this approach is illustrated by an example pertaining to neutron flux data. An example of a machine tool system analysis is presented to show the physical interpretation and the subsequent exploitation of the mathematical models. Various applications of the technique are also described, and the future development of DDS is envisaged.