Each domain is broken down into a series of subdomains. Subdomains are generally large organizations. In the .edu domain, for example, indiana is a subdomain representing Indiana University, and iupui is another subdomain representing IUPUI.
Within a subdomain, individual computers are also frequently given names. In one computer lab, all the computers are given names of ships or planets from a popular science fiction series.
A computer might have the following complete DNS address: klingon.cs.iupui.edu
From right to left, we can interpret the address in this way:
edu = educational institution This computer belongs to some type of school or other educational institution.
iupui = Indiana University / Purdue University / Indiana This is the name of a particular university. If we did not recognize IUPUI as a university name, we might be stuck here. It would still be reasonable to assume that IUPUI was the name of a school, though, because of the .edu extension.
cs = Computer Science Again, we might have to just guess that cs means computer science. Organizations might abbreviate departments as part of the internal naming structure they choose. CS is a very common abbreviation in universities for computer science.
klingon = the name of the particular computer. The only reason we know this is because it is at the very left hand part of the complete name.
As you can see, there is a lot of guesswork involved in interpreting a domain name, but the letters are not random. There is usually some kind of organization to the name.
Organizations apply to InterNIC for a particular subdomain name. Once they receive that name, they can create subdomains however they want.
To make things a little easier, many subdomain owners have followed a special convention: Since most transactions are done via the worldwide web, a special subdomain is often designated specifically to hold the main documents that organization wants distributed via the web. That subdomain is usually something like: www.orgname.com where orgname is the name of the organization (or some other catchy word) and .com is replaced by whichever domain type is appropriate.