Take, for instance, this bedroom in the Joslin house:

Here, I've expose to get the bed right, but the window washes out and you can't see anything in the shadows at the foot of the bed.
If I expose for the shadows, this is what happens:

You can see the gun on the chest at the foot of the bed, but it's at the expense of nearly everything else.
If I expose for the window, nearly everything else vanishes into blackness:

If I try using a flash (which, sometimes, is my only option), I get this:

While it's more even in exposure, the result is flat and uninteresting. I don't like it.
To the rescue: synthetic high dynamic range photography.
To do this, I take a series of photos of varying exposure (this is called bracketing the exposure). In this case, they varied from 1/8th second to 1/1000th second:
Then, using Photomatix, these exposures were combined into a single high dynamic range image. From that image, the software could create a regular dynamic range image that represented the "good exposures" for each small area. The result is this:

This procedure is performed on each and every shot in each and every panorama before the shots are stitched together.
The final result is this:

After re-sizing, sharpening and adding back a little bit of contrast, this is the final result (shown with the first, unprocessed shot for comparison):

