DNS is a hierarchical naming system that translates human-friendly domain names to computer-friendly IP addresses. It works by matching domain names to IP addresses through a global network of DNS servers. When a domain name like www.company.com is typed into a browser, DNS servers use a lookup process to return the corresponding IP address of 204.0.8.51. DNS is essential for navigating the internet as it allows websites and internet resources to be easily found through their domain names.