Technically, domain names aren't necessary to access a website. This is because with or without them, all websites can be accessed by their corresponding IP address. What is an IP address? It is a 32-bit numerical identifier that indicates what machine a website is on. The only problem is that for a human these numbers, (which come in a series of 4 octets), can be extremely hard to remember. This is why domain names were created. With a domain name a person can access a website through a word or phrase, which offers much more convenience than decimated octets.
In order for domain names to work, they must use domain name servers, (also known as DNS). These are special computers that store data pertaining to domain names and the IP addresses they point to. It does this through a process known as reverse mapping. What happens is after a domain name is entered, the domain name server will look up its corresponding IP address in a directory service. It will also correspond with other domain name services to see if they have 'knowledge' of the IP address. This process is known as a distributed database, since no 'official' entity is responsible for updating information on other domain name servers.
How can a computer be turned into a domain name server? It has to run DNS software. The most common DNS software is BIND, (which stands for Berkeley Internet Name Domain). This, (along with other types of DNS software), works in a hierarchal fashion. The beginning of the hierarchy contains the character ''. It is called the system's root. Underneath the root there are the domain extension such as .com, .org, .net or .biz.
A domain name server must also have client computers to help conduct its operation. These client computers are called nameservers and resolvers. Nameservers are responsible for locating a domain name's IP address. The resolvers, on the other hand, stores a list of all other nameservers on the Internet. This list is used to help contact these nameservers should a domain name's IP address not be stored in the initial domain name server.
Should a web hosting company bother in investing in a domain name server? It depends on how large their operation is. Smaller-scale web hosting companies probably won't get much from such an investment. However, if a company wants to attain the type of status that sites like Godaddy.com have attained, it may want to consider spending the money. Companies can get domain name servers from enterprises that sell regular servers.
In conclusion, the domain name server can be considered the heart of domain name functioning. Without them there would be no way a domain name would be associated with an IP address, which is what is really responsible for identifying computers on a network. This does not mean it's essential for a web hosting company to invest in one, especially since there are so many cheap domain name services they could use instead. Yet, if they do get a domain name server, they would have the ability to sell web hosting as well as domain names to their customers.