DNS stands for Domain Name System, it is a system that translates domain names such as example.com into IP Addresses such as 192.168.0.1, the IP address being the actual location of the server on the network or internet.
Your DNS provider holds a list of records which identify where various services are located, your email maybe on one server and your website on another, in a different country, or they could all be in the same place. DNS allows you to configure this.
The two most common set ups are as follows:
Using your domain registrar’s (123reg.co.uk, godaddy.com or similar) DNS
This is the simplest way of configuring your DNS, You have full control however its easy to break services if you do not configure things correctly.
Using a 3rd party Managed DNS provider such as your IT Company
Many companies will let their IT Company or Email provider manage their DNS, basically this involves pointing your domain at their server and letting them make all of the configuration changes, this can be safer but making changes will take longer.
In an ideal world you will have full control of your own DNS even if you allow your IT Company to manage it for you. The risk of outsourcing it completely is that if something was to happen to the IT company it may be a struggle to gain control again.