DHCP is a protocol that automatically assigns IP addresses and other network configuration parameters to clients. It allows administrators to change network settings centrally on the DHCP server rather than having to configure each client individually. The DHCP server uses the dhcpd.conf configuration file and dhcpd.leases database to manage IP addresses and other settings for clients on the network. The DHCP relay agent can forward requests from clients without a local DHCP server to servers on other subnets.