Dynamic Host Configuration Protocol or DHCP is a highly efficient protocol designed to automate the allocation of IP addresses to host systems. The huge advantage of DHCP is that it greatly reduces the administrative burden of IP address management. Whereas before an administrator would have to statically assign an IP address to a computing entity and keep records of this, DHCP allows for dynamic addressing. What this means is that computers or IP enabled devices can have an address allocated to them dynamically, whenever they connect to the system. This means that an administrator no longer has to assign an IP address to a new computer or IP device entering the network DHCP will automatically assign the next free IP address available.
The way DHCP works is that each DHCP enable client – almost everything nowadays – sends out a broadcast request searching for a DHCP server over the network. The DHCP server on receiving the request returns an IP address with additional configuration information such as the subnet mask, the gateway and the nearest DNS servers.
DHCP reduces administrative burden while reducing the possibility for configuration errors.