The DHCP server assigns a client an IP address taken from a predefined scope for a given amount of time. If an IP address is required for longer than the lease has been set for, the client must request an extension before the lease expires. If the client has not requested an extension on the lease time, the IP address will be considered free and can be assigned to another client. If the user wishes to change IP address then they can do so by typing "ipconfig /release", followed by "ipconfig /renew" in the command prompt. This will remove the current IP address and request a new one. Reservations can be defined on the DHCP server to allow certain clients to have their own IP address (this will be discussed a little later on). Addresses can be reserved for a MAC address or a host name so these clients will have a fixed IP address that is configured automatically. Most Internet Service Providers use DHCP to assign new IP addresses to client computers when a customer connects to the internet - this simplifies things at user level.
For step by step guide with diagrams check the link.
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