Great question, and sorry for not being clear. It's not the frequency tuning of a given outer hair cell (OHC) that that changes, it is their response to the sound level (what I meant by dynamic range). OHCs are activated by basilar membrane motion (the basilar membrane mechanically vibrates due to the physical sound). At low sound levels, the basilar membrane itself does not have a large displacement. The theory is that when OHCs depolarize (fire) due to basilar membrane displacement, resulting transduction currents activate motor proteins that change the length of the cell so that it "jumps" to displace the vibrating membrane (basilar membrane) more.

http://i.makeagif.com/media/10-06-2015/yxvqkm.gif

So at low sound levels, OHCs create a sharper displacement (gain) where vibration is maximal on the basilar membrane, which enhances the frequency coding onto auditory nerve fibers (via inner hair cells).

High sound levels displace the basilar membrane more, which can lead to broad patterns of excitement of nerve fibers coding for adjacent frequencies. At these levels, the OHCs do not change length as much, which compresses the membrane movement. The compression helps to maintain sharper acuity at the frequency that is physically present, and less so at adjacent frequencies. The function describing OHC length changes against level of sound is thus nonlinear, with gain at low levels and compression at high levels. This compression is not seen when the organism is dead, when OHCs are damaged, or when OHCs are genetically knocked out.