what exactly is dynamic scope?

From perlsub:

A "local" modifies its listed variables to be "local" to the enclosing
+ block, "eval", or
"do FILE"--and to any subroutine called from within that block. A "loc
+al" just gives
temporary values to global (meaning package) variables. It does not cr
+eate a local variable.
This is known as dynamic scoping.
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I think this explains the visibility of the labels too.