Our system admin person has just connected all our machines to the same single value using “Microsoft iSCSI Software Initiator Version” He then mapped it as a "Dynamic disk" using "Disk Management" on the Storage node of the Computer Manager control panel.
We have been told that we all can read and write from it just like a file share, but that it is faster and needs less admin to setup.
Please can someone explain to me how the locking of files etc works?
If this has been done badly you have just entered a world of hurt.
Plain old vanilla NTFS is not a cluster-aware file system, meaning imminent data corruption on any volumes shared between vanilla NTFS machines.
That said there's a number of things you can do to make this work, my favourite is to use Veritas Storage Foundation for Windows, it's not cheap but works a treat. Another is to make every attached machine run MS Cluster Services, again not cheap and perhaps a tiny bit of an overkill. There's also some software by a company called Tuxera that can provide file system clustering.
One quick test you can do is to get two machines connected to the same 'share', create a dummy text file with a name, go to the other machine and refresh the directory, does it exist? if you then go to the original machine and rename it does it change on the second machine? if you don't see the file and/or can't see it's file name change go and smack your sysadmin around the head and tell him to fix the problem and get himself a serverfault.com login :)
As you question, file locking doesn't work.
You could mount the iSCSI device on 1 server then share it as a Microsoft shared resource. Then file locking will work.