Dynamic brakes are most certainly still used.  While in dynamic braking mode, the traction motors function as generators driven by the motion of the train, with the output power of the generators dumped across resistor grids, converted to heat, and dissipated with fans.

When you see a diesel locomotive in the consist with one of the big steamer, such as the 4449 trip through Montana last fall, the diesel gets more use as a braking sled than it does as additional motive power.

After the 40 series, Electro-Motive moved the dynamic brake grids away from their traditional location (at least for EMD) over the prime mover.  The move allowed EMD to eliminate the dynamic brake "blister" on the 50 series locomotives.  The "blister" made it easy to spot if an EMD locomotive (GP or SD series) had dynamic brakes.  The dynamics were hidden away on most other locomotives.