Here’s a summary in print:
Dynamic Microphones (Shure SM57, Sennheiser MD421, Shure SM7b) –
Tough, durable. Largely used for live sound because of their ability to isolate a sound source and avoid feedback (pickup pattern is usually uni-directional, a.k.a. cardioid). Used for recording as well, but are regularly passed over in favor of condenser microphones in the studio. Does NOT require phantom power. Handles very loud sources like snare drums, electric guitar amps, etc.
Condenser Microphones (Neumann KM-184, AKG 414, Avenson STO-2) –
Considered by many to be a bit more delicate than dynamics. Largely used in the studio. Can be used live, but has a tendency to cause feedback. Requires phantom power. May have a variety of pickup patterns (uni-directional, omni-directional, figure-8). Requires greater care when using very close to loud sources. Regularly used for vocals, acoustic instruments, choral and orchestral recording. Considered to have a very “expensive” sound with greater detail than most dynamic mics.
End Game –
It sure helps to know how the sound being recording is going to fit into the final mix. A knowledge of the final function of the sound will assist in the appropriate capture of it. Some mics will make the source brighter, duller, thinner, thicker, et cetera. The choice of microphone is important, but may actually be trumped by the physical placement of the microphone (proximity to sound source, area of focus). The recording environment will play a role, too. If there is a large jazz band on the stage, sonic leakage (e.g. from the drums into the piano mic) will be a consideration in the choice and placement of microphone. A soft chamber group in an ambient hall may lend itself to an entirely different choice of mic and position.