While the excellent answer from Louis answers the how-to-find-out part of the question, I don't think it answers the other part.
Dynamic CPU frequency (and core-voltage) switching permits the CPU to work only as much as it needs to, thus saving energy. This becomes extremely critical feature on Laptops, where energy savings translate into longer period of usage without the need to recharge. Also less frequent battery recharges, means a higher battery life.
Without CPU frequency switching, the power consumption remains almost constant (variations coming from peripheral usage, e.g. hard-disk spinning or not, CDR-drive being in-use or not etc. Another big benefit of frequency switching is to reduce heating, and as a result fan-speed and as a result noise level.
In a nutshell, unless your computers' workload is fairly constant, you are on grid-power and need to frequently run tools (s.a. the performance measurement tool) that depend on fixed frequency -- you should have the dynamic frequency switching enabled.