An improved system and method for ranging while drilling, in effect, induces a dynamic hot spot on the casing of a nearby well. The induced hot spot acts as a magnetic source that can be reliably detected from within the drillstring and in such a manner as to infer the relative position and orientation of the casing to the drillstring. At least some disclosed method embodiments employ one or more rotating magnets in the drillstring, an array of at least two magnetometers in the drillstring and one or more phase-locked loops that are used to enhance the signal to noise ratio of the magnetic signal scattered off of the casing from the rotating magnetic field. The rotating magnet or magnets may be magnetic dipoles or magnetic multipoles, and may be modulated to enable the use of multiple magnetic field sources.