A CNAME record is an abbreviation for Canonical Name record and is a type of resource record in the Domain Name System (DNS) that specifies that the domain name is an alias of another, canonical domain name. Here "canonical" usually means: a more generally accepted or standard name.
This helps when running multiple services (like an FTP server and a webserver; each running on different ports) from a single IP address. Each service can then have its own entry in the DNS (like ftp.example.com and www.example.com).
CNAME records are handled specially in the domain name system, and have several restrictions on their use. When a DNS resolver encounters a CNAME record while looking for a regular resource record, it will restart the query using the canonical name instead of the original name. (If the resolver is specifically told to look for CNAME records, the canonical name (right-hand side) is returned, rather than restarting the query.) The canonical name that a CNAME record points to can be anywhere in the DNS, whether local or on a remote server in a different DNS zone.
For example, if there is a DNS zone as follows:
NAME TYPE VALUE -------------------------------------------------- bar.example.com. CNAME foo.example.com. foo.example.com. A 192.0.2.23
When an A record lookup for bar.example.com is done, the resolver will see a CNAME record and restart the checking at foo.example.com and will then return 192.0.2.23.
Which side is the "CNAME"? 
As mentioned above, with a CNAME record one can point a name such as "bar.example.com" to "foo.example.com." Because of this, during casual discussion the "bar.example.com." (left-hand) side of a DNS entry will often be called "the CNAME" or "a CNAME." However, this is inaccurate. The canonical (true) name of "bar.example.com." is "foo.example.com." Because CNAME stands for Canonical Name, the right-hand side is the actual "CNAME."
This confusion is specifically mentioned in RFC 2181, "Clarifications to the DNS Specification." The left-hand label is an alias for the right-hand side (the RDATA portion), which is (or should be) a canonical name. In other words, a CNAME record like this:
bar.example.com. CNAME foo.example.com.
may be read as:
bar.example.com is an alias for the canonical name (CNAME) foo.example.com. A client will request bar.example.com. and the answer will be foo.example.com.
- An alias defined in a CNAME record must have no other resource records of other types (MX, A, etc.). (RFC 1034 section 3.6.2, RFC 1912 section 2.4) The exception is when DNSSEC is being used, in which case there can be DNSSEC related records such as RRSIG, NSEC, etc. (RFC 2181 section 10.1)
- CNAME records that point to other CNAME records should be avoided due to their lack of efficiency, but are not an error. It is possible, then, to create unresolvable loops with CNAME records, as in:
foo.example.com. CNAME bar.example.com. bar.example.com. CNAME foo.example.com.
- MX and NS records must never point to a CNAME alias (RFC 2181 section 10.3). So, for example, a zone must not contain constructs such as:
example.com. MX 0 foo.example.com. foo.example.com. CNAME host.example.com. host.example.com. A 192.0.2.1
- Domains that are used for e-mail may not have a CNAME record. In practice this may work, but can have different behavior with different mail servers, and can have undesired effects.
DNAME record 
A DNAME record or Delegation Name record is defined by RFC 6672 (original RFC 2672 is now obsolete). A DNAME record creates an alias for one or more subdomains of a domain. In contrast, the CNAME record creates an alias only of a single name (and not its subdomains). Like the CNAME record, the DNS lookup will continue by retrying the lookup with the new name. If a DNS resolver sends a query without EDNS, or with EDNS version 0, then a name server synthesizes a CNAME record to simulate the semantics of the DNAME record.
For example, if there is a DNS zone as follows:
foo.example.com. DNAME bar.example.com. bar.example.com. A 192.0.2.23 xyzzy.bar.example.com. A 192.0.2.24 *.bar.example.com. A 192.0.2.25
An A record lookup for foo.example.com will fail because a DNAME is not a CNAME.
However, a look up for xyzzy.foo.example.com will be DNAME mapped and return the A record for xyzzy.bar.example.com which is 192.0.2.24; if the DNAME record had been a CNAME record, this request would have failed.
Lastly, a request for foo.bar.example.com would be DNAME mapped and return 192.0.2.25.
See also 
- "RFC 2181: Clarifications to the DNS Specification". IETF. July 1997. Retrieved 2011-03-09.
- Mockapetris, P. (November 1987). "RFC1034 - Domain Names, Concepts and Facilities" (in En-US). ISI. Retrieved 16 April 2011.
- Braden, R. (October 1989). "RFC1123 - MAIL - SMTP & RFC-822" (in En-US). Retrieved 3 June 2011.
- Bernstein, D.J. "CNAME records in mail" (in En-US). Retrieved 3 June 2011.