An internationalized domain name (IDN) is an Internet domain name that contains a language-specific script or alphabet, such as Hindi, Chinese, Russian or the Latin-based languages with diacritics, such as French. These writing systems are encoded by computers in multi-byte Unicode. Few domain registrar companies worldwide have started offering IDN registration. Recently I purchased (read Registered) my own IDN अजय.com from one such registrar. Now, the question comes is that how IDNs can be hosted or accessed? How do one type the internationalized domain name in browser window if (s)he doesn’t has the tools to type in that particular language. Enters Punycode.
Punycode is intended for the encoding of language specific component of the Internationalized Domain Names, such that these domain names may be represented in the ASCII character set allowed in the Domain Name System of the Internet (The encoding syntax is defined in IETF document RFC 3492). This procedure is known as ToASCII and ToUnicode. For example अजय.com in punycode becomes xn--l1b0cxc.com. To host an IDN (domain name containing international (non-English) characters), you need to convert the domain name into “punycode” before entering it into the DNS server. The domain registrar with which you will register the IDN shall provide you punycode equivalent of that IDN. However, you can find one such tool at network tools website.
In my opinion IDNs will take some time to pickup the pace. Moreover, it will add more confusion to already confused common user of internet.