The Internet's domain-name system (DNS) allows users to refer to web sites and other resources using easier-to-remember domain names (such as "www.icann.org") rather than the all-numeric IP addresses (such as "192.0.34.65") assigned to each computer on the Internet. Each domain name is made up of a series of character strings (called "labels") separated by dots. The right-most label in a domain name is referred to as its "top-level domain" (TLD).

The DNS forms a tree-like hierarchy. Each TLD includes many second-level domains (such as "icann" in "www.icann.org"); each second-level domain can include a number of third-level domains ("www" in "www.icann.org"), and so on.

The responsibility for operating each TLD (including maintaining a registry of the second-level domains within the TLD) is delegated to a particular organization. These organizations are referred to as "registry operators", "sponsors", or simply "delegees."

There are several types of TLDs within the DNS:

• TLDs with two letters (such as .de, .mx, and .jp) have been established for over 240 countries and external territories and are referred to as "country-code" TLDs or "ccTLDs". They are delegated to designated managers, who operate the ccTLDs according to local policies that are adapted to best meet the economic, cultural, linguistic, and legal circumstances of the country or territory involved. For more details, see the ccTLD web page on the IANA web site.
• Most TLDs with three or more characters are referred to as "generic" TLDs, or "gTLDs". They can be subdivided into two types, "sponsored" TLDs (sTLDs) and "unsponsored TLDs (uTLDs), as described in more detail below.
• In addition to gTLDs and ccTLDs, there is one special TLD, .arpa, which is used for technical infrastructure purposes. ICANN administers the .arpa TLD in cooperation with the Internet technical community under the guidance of the Internet Architecture Board.

Generic TLDs

In the 1980s, seven gTLDs (.com, .edu, .gov, .int, .mil, .net, and .org) were created. Domain names may be registered in three of these (.com, .net, and .org) without restriction; the other four have limited purposes.

Over the next twelve years, various discussions occurred concerning additional gTLDs, leading to the selection in November 2000 of seven new TLDs for introduction. These were introduced in 2001 and 2002. Four of the new TLDs (.biz, .info, .name, and .pro) are unsponsored. The other three new TLDs (.aero, .coop, and .museum) are sponsored.

Generally speaking, an unsponsored TLD operates under policies established by the global Internet community directly through the ICANN process, while a sponsored TLD is a specialized TLD that has a sponsor representing the narrower community that is most affected by the TLD. The sponsor thus carries out delegated policy-formulation responsibilities over many matters concerning the TLD.

A Sponsor is an organization to which is delegated some defined ongoing policy-formulation authority regarding the manner in which a particular sponsored TLD is operated. The sponsored TLD has a Charter, which defines the purpose for which the sponsored TLD has been created and will be operated. The Sponsor is responsible for developing policies on the delegated topics so that the TLD is operated for the benefit of a defined group of stakeholders, known as the Sponsored TLD Community, that are most directly interested in the operation of the TLD. The Sponsor also is responsible for selecting the registry operator and to varying degrees for establishing the roles played by registrars and their relationship with the registry operator. The Sponsor must exercise its delegated authority according to fairness standards and in a manner that is representative of the Sponsored TLD Community.

The extent to which policy-formulation responsibilities are appropriately delegated to a Sponsor depends upon the characteristics of the organization that may make such delegation appropriate. These characteristics may include the mechanisms the organization uses to formulate policies, its mission, its guarantees of independence from the registry operator and registrars, who will be permitted to participate in the Sponsor's policy-development efforts and in what way, and the Sponsor's degree and type of accountability to the Sponsored TLD Community.