DNS stand for Domain Name Service.
It is a service designed to resolve Internet names to IP addresses.
Computers communicate with each other through IP addresses, it does not understand names like yahoo.com as we do.
When you type a name like yaoo.com in your web browser, a request is sent by your browser to your ISP DNS server to lookup for a name in its database which matches to yaoo.com
It has entries similar to
www.yahoo.com 234.34.56.78
which then sends a request to 234.34.56.78 to display the yahoo.com web-page.
Actually there are many technical details to DNS, but basically this is how it works. It is mainly used so that people dont have to remember IP addresses, it does the conversion of names to IP addresses