What kind of server translates a domain name to an IP address?

One of the ideas behind the internet is the fact that you can type in a friendly name and get directed to the site instead of the more unfriendly IP address. How is this possible?

The type of server is called the DNS server (or Domain name server)

The two can be easily compared to a phone book. Need to figure out a phone number? You look up the last name. Same idea, instead the phone number is the IP address, and the last name is the friendly name of the site (such as "answers.com")