From the Internet Explorer 5 Resource Kit: (pages 261-264):
DHCP implementation: In the Data Type list, click the String data type. For the default value of the string, type the URL that points to your configuration file. This file can be a .pac, .jvs, .js, or .ins configuration file.
In the DNS database file, enter a host record named wpad that points to the IP address of the Web server that contains the .pac, .jvs, .js, or .ins automatic configuration file.
-or-
DNS implementation: Enter a CNAME alias named wpad that points to the name (the resolved name, not the IP address) of the server that contains the .pac, .jvs, .js, or .ins automatic configuration file.
However, renaming an .ins file that was generated with IEAK or manually created with Notepad to Wpad.dat does not work when implementing Autodiscovery with DNS.
In the DNS database file, enter a host record named wpad that points to the IP address of the Web server that contains the .pac, .jvs, .js, or .ins automatic configuration file.
-or-
DNS implementation: Enter a CNAME alias named wpad that points to the name (the resolved name, not the IP address) of the server that contains the .pac, .jvs, .js, or .ins automatic configuration file.
None of the settings get applied to the browser. The Wpad.dat file does get queried and cached to the temporary Internet cache (assuming your DNS or DHCP servers are properly configured), but it does not get processed.
In a DNS Implementation of Autodiscovery, the browser only interprets a renamed proxy automatic configuration file or .pac, .jvs, or .js file. In a DHCP Implemtation of Autodiscovery a .ins can be used, as the browser is being told where the file is by the DHCP Server, as oppossed to a DNS implem ation where the browser is looking for a "hardcoded" URL of http://wpad.domain.com/wpad.dat".