Running your own DNS server is a great way to accelerate your network's responsiveness, reduce your reliance on public infrastructure, and benefit from extra functionality like hostname routing.. I use DNSmasq at home to handle simple DNS stuff for my LAN; in that case, local and the associated domain and expand-hosts keywords are appropriate. The DNSmasq server is my primary nameserver, so all requests go through it; any nonlocal addresses are passed back to the ISP's nameserver.
A local DNS server is a server that is setup inside of a company or home's network for use by other clients on the network. Instead of using something like Google Public DNS, you're able to setup your own local DNS server, so that all of the other clients on the network receive their network settings and activity to your server, as opposed to someone else's. In businesses, when a domain.. I have a small home network that just got larger (new roommate, my existing roommate got a laptop (on top of her computer), my friends coming over with laptops, etc.). I'd like to run a local DNS server for lookups of my local network stuff (fileserver.local, windowsTV.local, machineA.local, machineB.local, appletv.local). I used to have a business line with a static IP, and run bind/named.