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Hi Milly - You'll need to drag "section 1" down into the Dynamic area.
See Make Element Dyjamic 2.1 here: Using Dynamic Content in a Email - Marketo Docs - Product Docs
If you want parts of "section 1" to be dynamic instead of the whole section, then you'll need to create editable areas in the HTML of your email template. To do that, you'll need to add a div class mkteditable to each content section (e.g. paragraph, header) of your email template.
Hope this helps
This has been very helpful, thank you Tim!