The most common and efficient way for
computers on a large network to obtain an IP address is through a Dynamic
Host Configuration Protocol (DHCP) server.
DHCP is a software
utility that runs on a computer and is designed to assign IP addresses
to PCs. The computer running the software is known as a DHCP server.
DHCP servers hand the IP addresses and TCP/IP configuration
information to computers that are configured as DHCP clients. This
dynamic process eliminates the need for manual IP address assignments.
However, any devices requiring a static, or permanent, IP address must
still have their IP address manually assigned.
When the DHCP server receives a request from a host,
it selects
IP address information from a set of predefined addresses that are
stored in its database. Once it has selected the IP information,
it offers these values to the requesting device on the network. If
the device accepts the offer, the DHCP server will then lease the
IP information to the device for a specific period of time.

The IP address information that a DHCP server can hand out to
hosts that are starting up on the network includes the following:
- An IP address
- A subnet mask
- Default Gateway
- Optional values, such as a Domain Name System
(DNS) server
address
The use of this system simplifies the administration of a
network because the software keeps track of IP addresses.
Automatically configuring TCP/IP also reduces the possibility of
assigning duplicate IP addresses or invalid IP addresses. For a
computer on the network to take advantage of the DHCP server
services, it must be able to identify the server on the local
network. This is accomplished by choosing to obtain an IP address
automatically on the client's software via its Internet Protocol
(TCP/IP) Properties dialog box. In other cases, an operating
system feature called Automatic Private IP Addressing
(APIPA)
enables a computer to assign itself an address if it is unable to
contact a DHCP server.