Domain Names - How They Work?

I was involved recently in a start-up website along with a friend. (I will give updates on this a little later). And when we were discussing on domain names, I explained how a domain name works - at least - how much I understood of it.

How is the visitor directed to a webhost where the website is installed with just typing the domain name in the browsers' address bars?

Here is my understanding of how it all works.

1. The visitors type in the website name (the domain name, followed by optional path to particular page).
2. The DNS, Domain Name Server, associated with their network, is sent a query for the domain name.
3. The DNS gives the name-server addresses for the particular domain name, as it is present in its database. The webmaster would have already configured these addresses to point to the webhost's address. (It would be something like: ns1.webhost.com, ns2.webhost.com).
4. The request then comes to the webhost, and is supplied with the domain name.
5. The webhost, then redirects to the exact path in its server where the website is loaded. For this to happen, the webmaster must also park the domain name. By doing so, the webmaster lets the webhost know that there will be requests coming in for a domain name, and that it has to be pointed to a particular place. (This allows for more than one domain to be parked on the same webhhost).

Let me know if you need to know more. Also, there will surely be some one who know more on this - so correct me if I am wrong.