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Punycode is a unique encoding system used to represent Unicode characters within the limited character set of the Domain Name System (DNS). The DNS traditionally only supports ASCII characters, which are insufficient for representing the vast array of characters found in many languages worldwide. Punycode bridges this gap by translating Unicode characters into an ASCII-compatible format. This allows domain names containing non-ASCII characters, such as those with accents, umlauts, or characters from non-Latin scripts, to be used in domain names.

The process of converting a Unicode domain name into its Punycode representation is called encoding. The reverse process, converting Punycode back into a Unicode domain name, is called decoding. When a domain name containing non-ASCII characters is registered, it is converted to its Punycode equivalent for use within the DNS. This Punycode version is what is actually stored and resolved. Users interacting with these domain names typically do not see the Punycode; their web browsers or email clients handle the conversion automatically.

The Punycode standard is defined in RFC 3492. It works by appending a prefix, often "xn--", to the domain name to indicate that it is encoded using Punycode. The rest of the string represents the encoded Unicode characters. This system ensures that domain names remain universally resolvable across different systems and networks, regardless of the user's language or keyboard input. Without Punycode, internationalized domain names (IDNs) would not be possible, significantly limiting global internet accessibility and usability.