The processing of your card purchase is a three party procedure: the merchant making the sale, the card processor for the merchant and the card issuing bank. Dynamic currency conversion, as the little scam is called, is an arrangement between the merchant and the processor who sells the pos terminal to the merchant and provides the software which can usually convert to usd, canadian, pounds, euro, australian and yen. What they don't tell you is that they are required by the ccard companies visa and mc to provide the invoice in the currency of their country or GIVE YOU THE CHOICE TO ACCEPT THE CONVERSION to dollars or whatever.
There is big money here since the 'normal' rate is 3 percent above bank rate- all kept by processor or split with merchant. A typical contract gives the merchant one percent if he processes over 100,000 pounds annually.