VDC is one of those features that's hard to explain unless you understand the other systems on your car.
VDC, or Vehicle Dynamic Control, is a safety feature that should be kept on at all times unless you are planning to race. If you decide to go after a few stoplight kills or take your car to the track then you need to turn it off.
To understand VDC you also need to understand how your ABS, Direct Ignition, Brake Assist, and TCS (traction control system) work. VDC controls all these subsystem to help you when you are in a situation where your car would loose control. Also, if your car has VDC then it has TCS.
TCS Function
The wheel spin of the drive wheels is detected by the VDC/TCS/ABS control unit from the wheel speed signals from the four wheels, so if wheel spin occurs, the rear wheel right and left brake fluid pressure control, typically through the brake assist system, and engine fuel cut are conducted, through the electronically controled direct ignition system, while the throttle value is restricted to reduce the engine torque and decrease the amount of wheel spin. In addition, the degree the throttle is opened is controlled to achieve the optimum engine torque.
Depending on road circumstances, the driver may have a sluggish feel. This is normal, because the optimum traction has the highest priority under TCS operation.
TCS may be activated any time the vehicle suddenly accelerates, suddenly downshifts, or is driven on a road with a varying surface friction coefficient.
During TCS operation, it informs a driver of system operation by flashing SLIP indicator lamp.
VDC System
A simple explaination for VDC is it detects wheel spin differences between all four wheels, looks at acceleration (via G-force sensor), and measures the steering angle then uses that to control brake(s) to keep the car from spinning. It can also cut throttle as needed.
The full explanation:
In addition to the TCS/ABS function, the driver steering amount and brake operation amount are detected from the steering angle sensor and pressure sensor, and the vehicle's driving status (amount of understeering / over-steering) is determined from information from the yaw rate sensor/side G sensor, wheel sensor, etc., and this information is used to improve vehicle stability by controlling the braking and engine power to all four wheels.
The SLIP indicator lamp flashes to inform the driver of VDC operation. During VDC operation, the body and brake pedal lightly vibrate and mechanical noises may be heard. This is normal.
The ABS warning lamp, VDC OFF indicator lamp, and SLIP indicator lamp might turn on when the vehicle is subject to strong shaking or large vibration, such as when the vehicle is on a turn table or a ship while the engine is running. In this case, restart the engine on a normal road, and if the ABS warning lamp, VDC OFF indicator lamp, and SLIP indicator lamp turn off, there is no problem.