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Many people wonder what actually happens when a DNS server does its thing. I will try to dispel any myths here and go through the process from beginning to end. There will be 2 scenarios here. One has a DNS forwarder in it and the other does not. There isn't a big difference in what happens, but there is a difference.

Reverse-Lookup is another story. See How Reverse-Lookup Works.

Please note: There is a little more than this going on, but this is the basic process and is technically correct for what it covers.

The players:
The user with the PC and the web browser, known as the "Client".
The DNS server they have in their DNS setting in Dial-up networking, or network TCP/IP configuration. Know as the "ISP's DNS server". This may be your DNS server if clients query you, as in a corporate network.
Network Solutions' (Internic) Root servers, know as "Root server". Note: Network Solutions coordinates with the NICs of all top-level domains in the world to update the root servers. The Root servers are worldwide and do not care what the top level domains is. They have it.
The destination domain's DNS server, known as the "Destination DNS".

First, without the forwarder:
The Client types in a web address or clicks on a link. Some ".com" address.
His PC's TCP/IP stack sends a DNS query to the first DNS server listed in his configuration, the ISP's DNS server.
The ISP's DNS server looks in its cache to see if it has the IP address (this is likely for names like www.Yahoo.com or www.Microsoft.com).
If it has the address in its cache, it sends it back to the requesting Client. All done!
If not, then it looks at all of the domains it host DNS for, primary or secondary.
If it has the address from those, it sends it back to the client. All done!
If not, it sends the query to A.Root-Servers.Net, or other Root DNS server if that one is not available. (This depends on the order of records in the DNS server's cache file. Most of the time it starts with "A")
The Root DNS server looks into its records for the zone "com".
It finds the record for the destination zone.
It send the NS records for that destination zone (primary secondary, and more if available) back to the requesting DNS server, your ISP's DNS server.
The ISP's DNS server now has the address of the DNS server for the destination domain it has a query pending for.
The ISP's DNS server sends its query, for "www.somedomain.com", to that destination DNS server.
Note: If the primary DNS server is down, the DNS server should attempt the secondary. This may not be the case with MS DNS on NT 4.0. It has been my experience that it will not look for the secondary DNS server and will fail the query.
The DNS server for the destination domain "somedomain.com" says, "Hey, that's me! I'm authoritative for that domain. I've got that record for 'www'!" (In the case of the secondary, it says, "Well I'm not authoritative, but I know the address because I have it in my zone files. Here it is.") This also counts for situations where the name is www.other.somedomain.com or www.long.name.other.somedomain.com. The root servers only care about the second level domains, anything further is handled by the DNS server for the second-level domain.
The somedomain.com DNS server sends back the IP address of the IP address for the "www" host to your ISP's DNS server.
Your ISP's DNS server now caches that IP address it just got back since it is logical to assume that it may need it again.
Your ISP's DNS server then sends the IP address back to the Client PC. All done!


Please note: With both of the examples shown here, the "com" top-level domain is used. That domain, the "net", "org", "mil", "edu", "int", "us", and "gov" domains are covered by the Root servers. In cases where the Root server does not keep the address for a domain, such as Canada, "ca", or Germany, "de", the Root server knows where the top-level name servers are for that domain and will answer the query as such. Then the DNS server who receives the query, such as the ISP DNS server, or your DNS server, will then send the same query to the Root DNS server for that top-level domain and get an answer back from that DNS server. This adds an extra step that does not apply to the "com" domain.

Now with the forwarder:
The Client types in a web address or clicks on a link. Some ".com" address.
His PC's TCP/IP stack sends a DNS query to the first DNS server listed in his configuration, the ISP's DNS server.
Well, in this case, the ISP's DNS server is a forwarder.
The forwarder DNS server looks in its cache to see if it has the IP address (this is likely for names like www.Yahoo.com or www.Microsoft.com).
If it has the address in its cache, it send it back to the requesting Client. All done!
If not, the forwarder send the query along to the DNS server in its forwarder list and asks it to complete the query. Refer to the "forwarded" DNS server as the ISP's DNS server from here on.
The ISP's DNS server looks in its cache to see if it has the IP address (this is likely for names like www.Yahoo.com or www.Microsoft.com).
If it has the address in its cache, it send it back to the requesting Client. All done!
If not, then it looks at all of the domains it hosts DNS for, primary or secondary.
If it has the address from those, it sends it back to the client. All done!
If not, it sends the query to A.Root-Servers.Net, or other Root DNS server if that one is not available. (This depends on the order of records in the DNS server's cache file. Most of the time it start with "A")
The Root DNS server looks into its records for the zone "com".
It finds the record for the destination zone.
It send the NS records for that destination zone (primary, secondary, and more if available) back to the requesting DNS server, your ISP's DNS server.
The ISP's DNS server now has the address of the DNS server for the destination domain it has a query pending for.
The ISP's DNS server sends its query, for "www.somedomain.com", to that destination DNS server.
Note: If the primary DNS server is down, the DNS server should attempt the secondary. This may not be the case with MS DNS on NT 4.0. It has been my experience that it will not look for the secondary DNS server and will fail the query.
The DNS server for the destination domain "somedomain.com" says, "Hey, that's me! I'm authoritative for that destination domain. I've got that record for 'www'!" (In the case of the secondary, it says, "Well I'm not authoritative, but I know the address because I have it in my zone files. Here it is.") This also counts for situations where the name is www.another.somedomain.com or www.long.name.another.somedomain.com. The root servers only care about the second level domains, anything further is handled by the DNS server for the second-level domain.
The somedomain.com destination DNS server sends back the IP address of the IP address for the "www" host to your ISP's DNS server.
Your ISP's DNS server now caches that IP address it just got back since it is logical to assume that it may need it again.
Your ISP's DNS server then sends the IP address back to the forwarder DNS server, who then caches it.
The forwarder DNS server then sends the IP address back to the Client PC. All done!


Slave Servers:
In the case of a slave server, the same thing happens as the first scenario, except the slave server does not look at its own primary and secondary zone files, because it has none. It can only forward queries and cache them. It is not authoritative for any zone.

Email:
With email, the same type of thing happens except the answer the DNS server gets back is a list of names and costs. The DNS server then resolves the names to IP addresses using the above methods, then sends this information (IP addresses and costs) back to the mail server who sends the mail to the first server it can reach, by order of ascending cost.

More on Root Servers:
The Root servers are the top DNS servers in the world. While your DNS server may be authoritative for yourdomain.com., the Root servers are authoritative for ".". which is the absolute top of the DNS hierarchy. (Yes that's a dot ".") In cases where the Root server is not authoritative for a domain, such as Canada, "ca", or Germany, "de", the Root server knows where the top-level name servers are for that domain and will answer the query as such. Then the DNS server who receives the query, such as the ISP's DNS server, or your DNS server, will then send the same query to the DNS server for that top-level domain and get an answer back from that DNS server. This adds an extra step that does not apply to the "com" domain. More info.

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