Used when a situation causes a collective emotional response, often sadness or joy. When she finished her farewell speech, there was not a dry eye in the house.
Pro Tip 2/3
Group Experience
Refers to a shared emotional experience among a group, like an audience. The reunion of the old friends was so touching that there was not a dry eye in the house.
Pro Tip 3/3
Not Literal
It's a figure of speech and might not mean everyone is literally crying. His comedy was so raw and honest, there wasn't a dry eye in the house, laughter or tears.