A network DHCP (dynamic host configuration protocol) server assigns an IP address to each new device that connects to the network.
As can be seen in the illustration below, there are four steps to connect to a network: The client device (smart phone, tablet) automatically lets the server know it wants to connect (DHCP discover), the server offers the device an IP address (DHCP offer), the client device accepts (DHCP request), and the server configures the device and grants access to the network (DHCP pack).
The DHCP server stores a pool of valid IP addresses (and invalid ones) ready to assign to devices. It also keeps a record of TCP/IP configurations and IP address expiration dates for all network clients.
Figure 1: The DHCP process for connecting client devices to a network through the server.