Setting up DNS for internal computer name resolution is crucial for simplifying network management and making it easier to reference devices by name instead of IP addresses. There are several ways to achieve this:

1. Local Host File: As you mentioned, you can manually edit the local host file (e.g., /etc/hosts in Linux) to map IP addresses to hostnames. However, this approach is not scalable and becomes impractical for managing a large number of computers.
2. Local DNS Server: To centralize and manage hostnames and IP addresses more effectively, you can set up a local DNS server within your organization. This DNS server contains all the mappings of internal computer names to IP addresses. Then, configure your network settings on all computers to use this internal DNS server instead of the one provided by your ISP. This approach is scalable and easier to manage, especially in larger environments.
3. Directory Service Integration: If you're using a directory service like Active Directory or LDAP, you can integrate DNS with it. These directory services handle user and machine information in a central location and can automatically populate DNS records with machine-to-IP address mappings. This eliminates the need for manual entry of this information, making it a convenient option for larger organizations.

Each of these methods has its advantages and use cases. The choice depends on your organization's size, complexity, and specific requirements. Local DNS servers and directory service integration are typically favored in larger enterprise environments due to their scalability and automation capabilities, while the local host file approach may be suitable for smaller networks with only a few computers.