Cephalopods employ their chromomorphic skins for rapid and versatile active camouflage and signalling effects. This is achieved using dense networks of pigmented, muscle-driven chromatophore cells which are neurally stimulated to actuate and affect local skin colouring. This allows cephalopods to adopt numerous dynamic and complex skin patterns, most commonly used to blend into the environment or to communicate with other animals. Our ultimate goal is to create an artificial skin that can mimic such pattern generation techniques, and that could produce a host of novel and compliant devices such as cloaking suits and dynamic illuminated clothing. This paper presents the design, mathematical modelling and analysis of a dynamic biomimetic pattern generation system using bioinspired artificial chromatophores. The artificial skin is made from electroactive dielectric elastomer: a soft, planar-actuating smart material that we show can be effective at mimicking the actuation of biological chromatophores. The proposed system achieves dynamic pattern generation by imposing simple local rules into the artificial chromatophore cells so that they can sense their surroundings in order to manipulate their actuation. By modelling sets of artificial chromatophores in linear arrays of cells, we explore the capability of the system to generate a variety of dynamic pattern types. We show that it is possible to mimic patterning seen in cephalopods, such as the passing cloud display, and other complex dynamic patterning.