In colloquial use, on the fly means something created when needed.
The phrase is used to mean:
1. something that was not planned ahead
2. changes that are made during the execution of some activity

A computer can compute results on the fly, or retrieve a previously stored result. When used for encrypted data storage, on the fly the data stream is automatically encrypted as it is written and decrypted when read back again, transparently to software. On-the-fly programming is the technique of modifying a program without stopping it.