To understand Dynamic Keyword Insertion better, Google AdWords has a document on it.

Featuring 7 points which include:

• How do I use keyword insertion?(tutorial)
• What is keyword insertion?
• When and why should I use keyword insertion?
• How does keyword insertion work with broad-match keywords?
• Will using keyword insertion affect my keywords' Quality Scores?
• Why doesn't my keyword appear in my approved keyword insertion ad?
• Why was my keyword insertion ad disapproved?

Along with the document, the tutorial helps beginners understand this feature better.

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