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In short, the DNS is a big huge distributed database. Reading a hostname from right to left goes from least-specific to most-specific, and as you move from right to left, the DNS servers handling each level know where to point requests for the next level up.
So, if you want to know about framboise.hoopycat.com, first you ask the . (root) DNS servers where .com is, then you ask the .com DNS servers where .hoopycat.com is, and finally you ask the .hoopycat.com DNS servers where framboise.hoopycat.com is.
By changing the nameservers of record through your domain registrar, you've basically arranged for the .com (or .org, or .co.uk, or whomever you are) nameservers to say "go ask ns1/2/3/4/5.linode.com; they'll have what you need."
The other side of this is that ns1/2/3/4/5.linode.com need to know enough information to be useful. Here's where we get some vocabulary: a nameserver has a collection of zones, or discrete parts of the DNS tree. These zones contain one or more resource records (or RRs) that have the actual "stuff" in the zone. Some common ones include the A ("Address") record that map a name to an IP address and the NS ("Nameserver") record that lists the nameservers responsible for a zone. (Yes, .com is a zone, and it uses NS records to delegate authority for hoopycat.com to the authoritative nameservers)
In many (most?) cases, the RRs for a zone are contained in a zonefile, which is a file that contains the zone. (This is a very anti-climactic paragraph.)
You don't have to worry about this -- the DNS manager sets everything up for you and creates it so you don't have to edit it directly. But, if you want to take a peek, click on the "View zone file" link next to a domain on the main DNS manager page. That's what the actual nameservers are loading into memory and serving out whenever another nameserver cares enough to ask.
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