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Most servers have one or more static IP addresses, which are generally set in one of the boot configuration files. However, it's not uncommon to have one or more workstations on your network, and its often convenient to configure their addresses in a central place. DHCP allows workstations to dynamically discover their IP addresses.
If you have a cable modem, it's quite possible you get your IP address via DHCP. Your cable provider has a DHCP server, and any machine you plug into your cable modem becomes a DHCP client, automatically getting an IP address from your provider's DHCP server. Section 46.11 describes NAT, which can let you run multiple machines on your home network in a case like this.
To run your own DHCP server, you need a DHCP daemon. isc-dhcpd is available at http://www.isc.org/products/DHCP/ and allows a variety of configurations. I have a variety of machines on my network at home, including servers with static IP addresses, workstations that use DHCP but always get the same IP address, and a few IP addresses dynamically allocated to random machines plugged into my network (handy for building a new machine or for friends visiting with their laptops).
Fixed dynamic addresses are extremely useful. Most of the normal workstations I have at home are configured to have fixed dynamic addresses: they get their IP addresses from the DHCP server, but the server recognizes each machine's Ethernet address (otherwise known as its MAC address) and hands out the same IP address each time. This allows me to have a centralized database of workstation addresses and makes configuration of those workstations trivial, while still giving me consistent IP addresses for all of my workstations.
-- DJPH
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| 46.9. Domain Name Service |  | 46.11. Gateways and NAT |
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