DNS is short for domain name system which is just a really fancy way of identifying websites by name. DNS is a universal global technology that allows websites to use names like NetworkBits.NET or Yahoo.co.uk to be identified & accessed. Every business should have a name that can be easily remembered with a good name helping to further the business. In the print yellow pages an excellent name is as early in the alphabet as possible because most people start calling at the top of the list meaning that the first businesses get more calls for the same price. In the internet world our names are even more important, but are a bit more complex to select. A name that is short is more memorable meaning more people will remember it. A domain name also needs to be relevant to the business, specifically if somebody is searching for "cheap blue widget" any website with the words cheap, blue, or widget in their name get a bonus and will be displayed more often for the search results also getting more business for the same cost. Professional, attractive names help a lot as it is one of the few pieces of information people on the web have to go on. The last few letters of the name (after the period- .com, .net, .co.uk) are also quite important. For example .com is what people in the US are accustomed to seeing where people in the UK are accustomed to .co.uk. Some are less valuable than others, for example "example.com" is much more valuable than "example.name".
Domain names are purchased, actually it’s more of a lease as they are priced annually and will expire if one does not continue to ‘renew’ the name. However considering the importance of the name, and that they can be bought & sold (sometimes for over a million dollars) and your lease cannot be canceled I think purchased is still a better fit. The company you buy them from is called a "domain registrar" who does fancy things to ensure no two people can own the same domain name and generally registers your name with the internet universe. The letters after the last period (i.e .com or .cn) is called the top level domain (TLD). Some are cheaper than others and can give you more of a selection of names (because fewer people want them) than others. In the US you generally want a .com then a .net or .org. In the UK .co.uk is best. If your website is targeted to a specific country try to have your name end with those two letters. .biz, .info, .name, .mobi, and others you rarely see) are much harder to rember because people just don’t expect them. However, if the name you want is a great choice (short, relevant, & memorable) it still may make sense to take the lesser domain name.
Name selection is quite important. for example, tooth.com sold for $50,000, NebraskaTeethWhitening.com is for sale (at the time of this writing) for $749, but if your not willing to pay this much you would have to settle for something like NEOmahaToothWhitening.com which is available. Note how as the price went down the name got much longer (and more specific). When you pick a name spend some time at it and pick one that is coherent, makes sense, is memorable, and is (somewhat) short. Avoid using misspellings in your domain name as people may not remember how to misspell it and may never find you again. You can put dashes in, especially between words, but again people have to remember to put in the dash. Words that are relevant to your users are helpful to have in your domain name because search engines favor these websites. When you run out of relevant word combination get creative and try something catchy. For example my website name Networkbits.net started as just about IT networking so network was very relevant, but bits was not. However I think adding bits to it makes it catchy, keeps it short, and most importantly was available when I bought it.
With domain names they name a website and will be seen quite frequently, many people call themselves whatever their domain name is to help people remember how to find them. Choose a domain name carefully looking for a short name of carefully chosen words that people can easily remember. Don’t be stupid & misspell your word or pick something hard to remember or really long. Put some time into it and keep switching various words in, most domain name registrars have some basic suggestion tools to help you. If you are going to have a lot into a website consider buying the same name with different extensions (for example I’d be interested in owning NetworkBits.COM, & networkbits.ORG). People who forget which one I have might find themselves at one of the other ones. If I was a local business, or a non-profit organization I’d be concerned with people putting up a porn site there to try and black mail me into buying the name. There are people who buy all of the good domain names hoping to resell some of these at a profit latter. While they may make money at it (you may make money on your name if you choose to sell it latter), I recommend you don’t. These people are speculators & investors. Some can make a lot of money if they know what they are doing, some lose everything.