Creating dynamic custom roles with MongoDB Stitch allows developers to control data access controls without writing extensive code. This is achieved by using Stitch's built-in templates and defining custom roles that query other collections when deciding whether to allow a user to insert a document. The example application, a troll-free timeline, uses two roles: `anyReader` for reading any post, and `allowedTagger` which controls what the application can write to the collection. The `allowedTagger` role is defined using a JSON expression that passes parameters to a Stitch function named `canTheyTag`, which checks if the poster's username appears in the peopleWhoCanTagMe array of the retrieved document. This approach enables developers to implement traditional database roles using MongoDB Stitch, optimizing rules by including users' roles as an attribute in their authentication token.