What's with all this dynamic range?

In recent times the audio and consumer media seem to have latched onto the term High Definition or HD Audio. For digital audio it commonly refers to recordings which come with an extended dynamic range capability; typically a range of up to 120 dB. Now that is quite a scary figure as it represents a difference between the signal voltage of the quietest sound – the background noise – and the loudest sound of one million times.  Compare that to the days when we would happily listen to vinyl with a dynamic range of 60 dB; a ratio of a mere one thousand times. This leads to two questions; can we realistically design a playback system that good and if we can do we really need to?