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Typically, when a browser sees a host name, it sends a request to the DNS resolver service which then sends a request to a domain name server to return an IP address corresponding to that host name. When the IP address is returned, a connection is made to the appropriate Web server.
In the case of IDNs, when a browser sees a non-ASCII character host/domain name in its location bar, or a URL with a non-ASCII domain part embedded in a web page, the application is required to convert the non-ASCII characters into a special encoded format (Punycode) using only the standard ASCII subset characters. Punycode is required because the restriction that only a subset of ASCII characters be used in URL/URI at the network protocol level is still enforced, even with the introduction of IDNs. (This requirement is defined in RFC 3490 and states characters used in IDNs must be drawn from Unicode Standard 3.2.)