A Domain Name is the addressing of a website on the Internet.
A Domain points to a computer(server) on the Internet which has an IP Address. In the same way you use your friends names in your mobile phone to reference their unique phone number, your domain name is your unique reference to your IP address in a memorable format.
An IP Address is a unique numerical string of numbers assigned to every computer connected to the Internet.
Domain Names are indexed on DNS (Domain name system) Servers which are comparable to huge database driven address books for the Internet.
When you type in the address of a website into your internet web browser, you are actually requesting information from a DNS Server normally located at your Internet provider. There are thousands of DNS Servers all over the internet each continually updating its records all the time, every day.
These DNS Servers update their information on a daily or sometimes twice daily basis from Authorative Servers for each TLD. When a customer changes the information regarding the domain it is recorded on the Authorative DNS Server. The Authorative DNS Server will usually handle all the records for one TLD. For example all of the .ca's will be held on one server while all of the .co.uk's will be held somewhere else. When it comes time for a DNS Server to do its daily update it will request the information from each of the TLD's authorative DNS Server and make the necessary changes to its records.