I just setup a powerdns recursor under a clean Ubuntu 12.04 server. I didn't notice any difference in query times (using dig) so I looked at my /etc/resolv.conf file. I left "nameserver=127.0.0.1" but commented out "nameserver=172.16.1.254" which is my router/dns. Now dig shows a noticable improvement in query times so all is good.
I only downloaded the recursor, and it seems that I have removed the nameserver address from my server. My question is, how is my server able to resolve names? The recursor.conf file has no external domain setting, and the server doesn't know where any nameserver is so how can dig work at all? Sorry if I am missing something obvious but I am trying to learn more about linux and servers by diving right in.