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What is the purpose of creating a domain name for your LAN? I'm using DD-WRT on my router and assigned local.moofz.com as the LAN domain. I setup Apache HTTP servers on two of the computers on my LAN to test it out. I could reach them on oneil.local.moofz.com and vala.local.moofz.com, but I found out that I could also reach them via their hostnames oneil and vala.

If I can reach them through their host names, then what would be the purpose of having a domain name for my LAN?

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There's no requirement for a full domain name. Many people (myself included) use a workgroup name with .local suffix: e.g. workgroup.local. –  user3463 Feb 16 '11 at 22:03
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There's no requirement for the "LAN domain" to be internal-only either. For example, you would use "vala" inside the LAN and "vala.home.moofz.com" elsewhere. –  grawity Feb 17 '11 at 6:11

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up vote 10 down vote accepted

LANs can be way more complex than your setup. Corporate LANs can span thousands of machines.

In that case it is a lot easier to administer and maintain the infrastructure if the network is properly segmented.

On the DNS side this is usually done by naming conventions using domain names that somewhat resemble a structure that makes sense for the employees and administrators.

Edit: And the reason you can find hosts by their host names only is your search domain. It is pushed to your LAN's hosts via DHCP and if you omit the domain name it is the first place for your computers to look for the hosts.

So if you type vala your computer actually looks for vala.local.moofz.com because your router pushed a search domain of local.moofz.com.

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