Devices that implement Performing DNS queries via IP Multicast look up names ending in "local" using link-local multicast. If a network administrator creates their own unofficial private top-level domain and also gives it the name "local", then this creates a conflict.
The ideal solution is not to use the name "local" for private unicast DNS domains. However, for compatibility on networks where the administrator insists on using the name "local", OS X 10.3 can be configured to look up "dot-local" names first using multicast, and then, if that fails, using unicast.
This creates a StartupItem called /System/Library/StartupItems/DotLocalLookupConfigurator
This StartupItem creates a file called /etc/resolver/local.1, and keeps it updated to mirror the contents of the /etc/resolv.conf file. When OS X's lookupd tries to look up a name using link-local multicast and fails, it will then try looking up the name using a standard DNS query.
Note that if the same name exists both in multicast DNS and in unicast DNS, the multicast DNS name will be found first. Having two different hosts with the same name can lead to confusion, and generally should be avoided.