NIS stores administrative information such as user names, passwords, and host names on a centralized server. Client systems on the network can access this common data. This configuration allows to move from machine to machine without having to remember different passwords and copy data from one machine to another. Storing administrative information centrally, and providing a means of accessing it from networked systems, also ensures the consistency of that data. NIS also reduces the overhead of maintaining administration files such as /etc/passwd on each system.

A network of NIS systems is a NIS domain. Each system within the domain has the same NIS domain name, which is different from a DNS domain name. The DNS domain is used throughout the Internet to refer to a group of systems. a NIS domain is used to identify systems that use files on a NIS server. A NIS domain must have exactly one master (or primary) server, but can have multiple secondary (slave) servers.