For the younger kids: the red stick with a burning fuse is called dynamite. It explodes when the fuse burns all the way down. Dynamite is used in construction to break up rocks or hard ground.
Did the people think the dynamite was real and might explode and hurt them?
Yes, they ran away in fright.
How did the lady handle the situation with the dynamite?
She at first turned away. Then she turned back, grabbed the hand of the worker and tried to lead him away from the dog.
Why was her response heroic compared to the other people?
She was willing to endanger her own life to protect another person.