I'm sure you've encountered the idea of the slope of a curve, before. It's the first thing they teach when learning calculus. Remember this formula?
$$f^{'}\!\!\left(x_0\right)=\lim_{h\to 0} \frac{f\left(x_0+h\right)-f\left(x_0\right)}{h}$$
It's just the local slope of the curve at \$x_0\$.
The dynamic resistance is like that, except that the curve is related to the Shockley diode equation (as it applies to the BJT):
$$I_\text{C}=I_\text{SAT}\cdot\left[\exp\left(\frac{V_\text{BE}}{\eta \:V_T}\right)-1\right]$$
That non-linear curve looks like this:

On the right, I've expanded the view of the quiescent Q-point (the operating point) for the BJT amplifier. (You usually select some point on the curve where the circuit operates when there is no input signal to worry about, around which the circuit is supposed to operate when the AC signal is applied.)
As you can see, for tiny changes nearby the Q-point you can approximate the curve with a simple line (the line that is tangent to the Q-point on the curve.)
In no way is this an actual resistor that works like a resistor with DC applied to it. Real resistors actually are lines and they don't have a voltage across them when there is zero current, for example. Note that this slope intersects the x-axis somewhere to the right of zero? It's just the local slope at the Q-point and for small (AC) changes nearby, you are allowed to assume (for simplification purposes) that it holds for AC changes.
Now, if the changes are large enough then this slope fails. But once this dynamic resistance slope is no longer valid you are, by definition, no longer talking about small signal changes (the usual "AC" assumption) and have moved into the domain of large signal changes.
Of course, in practice people act as if their input signal is "small" enough that the dynamic resistance is always valid when, in fact, it really isn't. It's not uncommon for amplifiers to be operated in such a way that the operation moves up and down the Shockley curve far enough that the local slope value changes enough to matter. In these cases, it's broadly called distortion. This means that the Q-point dynamic resistance slope that was assumed valid, isn't sufficiently valid over the actual operating range. As a result, the output signal will be distorted somewhat (the non-linear curve interacts with it.) How much that may be acceptable is one of those design decisions that engineers make all the time.
So, that's about it. I'll now derive it from the above collector current equation so that you can see how it falls out using derivatives:
$$
\newcommand{\dd}[1]{\text{d}\left(#1\right)}
\newcommand{\d}[1]{\text{d}\,#1}
\begin{align*}
I_\text{C}&=I_\text{SAT}\left[e^{^\frac{V_\text{BE}}{\eta\,V_T}}-1\right]\\\\
\dd{I_\text{C}}&=\dd{I_\text{SAT}\left[e^{^\frac{V_\text{BE}}{\eta\,V_T}}-1\right]}=I_\text{sat}\cdot\dd{e^{^\frac{V_\text{BE}}{\eta\,V_T}}-1}=I_\text{SAT}\cdot\dd{e^{^\frac{V_\text{BE}}{\eta\,V_T}}}\\\\
&=I_\text{SAT}\cdot e^{^\frac{V_\text{BE}}{\eta\,V_T}}\cdot\frac{\dd{V_\text{BE}}}{\eta\,V_T}
\end{align*}
$$
Since \$I_\text{SAT}\left[e^{^\frac{V_\text{BE}}{\eta\,V_T}}-1\right]\approx I_\text{SAT}\cdot e^{^\frac{V_\text{BE}}{\eta\,V_T}}\$ (the -1 term makes no practical difference), we can conclude:
$$
\begin{align*}
\dd{I_\text{C}}&=I_\text{C}\cdot\frac{\dd{V_\text{BE}}}{\eta\,V_T}
\end{align*}
$$
From which very simple algebraic manipulation produces:
$$
\newcommand{\dd}[1]{\text{d}\left(#1\right)}
\newcommand{\d}[1]{\text{d}\,#1}
\begin{align*}
\frac{\dd{V_\text{BE}}}{\dd{I_\text{C}}}&=\frac{\d{V_\text{BE}}}{\d{I_\text{C}}}=\frac{\eta\,V_T}{I_\text{C}}=r_e^{'}
\end{align*}
$$
Note: It's perfectly fine to use \$I_\text{E}\$ instead if \$I_\text{C}\$ when computing \$r_e^{'}\$. But in active mode situations where \$r_e^{'}\$ is important for AC analysis, the difference isn't worth worrying about. The actual circumstances for any real parts in a real circuit with wash out any such slight difference, anyway. So don't sweat it.