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This question on how best to handle our domain setup arose as we wrote our article on Drupal multisite setups.
Parking a domain
Parking is a function of a DNS (Domain Name Server) entry, where the DNS zone for both the parked and original domains resolves to the same document root (the same content). This is what makes Drupal multisite installations possible (many sites can access one document root, but have their own settings, themes, etc. files to make them unique).
Outside the Drupal world, domains are frequently parked on top of each other when you simply want more than one domain to reflect the same content. A good example of this is when you have misspellings of your original domain parked in case people make typo’s – with parked domains in place, they will still arrive at the intended domain. Now mind you, the preferred method for doing this is to use domain redirects, as they avoid the possibility of search engines penalizing you for duplicate content.
Parked domains have email and DB
The advantage of parked domains, in particular for Drupal multisite setups, is that they may have their own email accounts and databases (DB’s).
Redirecting a domain
A domain redirect is a function of .htaccess, a file that allows user-controlled configurations of site structure via Apache. In this case, a redirected domain differs from a parked domain in that it is redirected to an entirely new and different domain, whereas the parked domains are loading off the same document root. Redirects are typically used to redirect old content to new content. Read all about redirects in our search engine friendly domain and file redirects tutorial, including the importance of a permanent (301) redirect over a temporary (302) redirect in terms of SEO (Search Engine Optimization).
What is an add-on domain?
An add-on domain is analogous to parking a new domain on top of a subdomain. Basically when your host offers you add-on domains they are simply creating a subdomain which points to a new domain. In other words, the domain is running off the document root of the subdomain, as explained in the parking section above.