A protocol that allows a device on a TCP/IP network to configure its operational parameters automatically. The device uses DHCP to negotiate with a DHCP server, which allocates it an IP address from a pool it manages and appropriate values for the subnet mask and other parameters. DHCP removes the need for manual configuration of these parameters on every device and provides a convenient method for them to share a limited pool of IP addresses. It is useful even on small networks and essential on large ones.

http://tools.ietf.org/html/rfc2131 The DHCP specification