A gaming machine having a dynamic pay schedule is provided. The machine selects a pay schedule from a set of pay schedules as a function of the number of coins inserted and the current state of the machine. The state of the machine is represented by an event counter which is incremented upon the happening of certain events. The current value of the counter is displayed. The predetermined pay schedules are ranked according to value of maximum payout. As the machine advances from one state to the next, pay schedules of successively higher rank are selected so that player's potential payout increases. At least one schedule has a progressive payout, which is periodically incremented upon the occurrence of predetermined events.