Its an auto HDR that only works with jpegs where the camera takes three shots and combines them in camera. I think most here who use the RX1 are shooting it in raw and, to the extent they're using HDR, it would be the old-fashioned manual way, rather than using the in-camera processing. Just a guess. I played with it very briefly when I first had the camera, but not enough to provide any information or advice on it.
I no longer have my RX1, but I'm sure the RX100 HDR function is the same. Ray explained how it works well, but here's a quick and very sloppy comparison. labels describing the shots are immediately above each photo. I have chosen a scene with bright sunshine outside and a darkened aquarium inside where the full range of Exposure Values can not be captured in a single exposure.
2. Here is an HDR done in software from 3 separate exposures (the 3 exposures were not properly lined up or shot on a tripod and that accounts for a lot of "issues" that are going). Even though my technique was super sloppy, I think you can see that if done right, a proper HDR technique will yield a better looking end result. The photographer just has way more control and can fine tune everything rather than trusting the small computing prowess of the camera.
3. These next 3 shots are the 3 I used to do the HDR in no.2. This first one we'll call "properly" exposed (although neither the aquarium nor the outside is properly exposed....it is roughly the midpoint for properly exposing either of them).
Now because of my poor technique, it's not as clear as it should be. I should have used a tripod, and actually getting 7 exposures 1 EV apart would yield smoother transitions. But hopefully it will still give you a rough idea.
Here's an in-camera I did of my dog Lucy yawning. I'm impressed with the anti-ghosting algorithm since the camera takes 3 shots of her, her jaw was obviously moving, but you see no artifacts of that in the finished HDR the camera spits out. I kind of like it in an overprocessed way. I may use the function once in awhile in addition to doing exposure bracketing. if the camera does a good enough job, I may not bother.