I am sure that by now you would have at least seen one domain name which was written in a non-english language but still if you have not seen any such domain the screen shot below would explain the entire story. I would try to explain the mechanism behind these kind of Domain Names in this post
Domain Names which can be viewed in a language-specific script are known as Internationalized Domain Names or IDNs. This concept was introduced in December 1996 and was first implemented in 1998 but ICANN issued guidelines for the use of IDNA only in June 2003 any by today most of the TLDs support IDNs.
As we all know that a domain name has to resolve to an IP Address to function, but as language-specific domain names contains NON-ASCII characters and there are various limitations in their use, to overcome this basic limitation an encoding mechanism for such names is implemented by which this collection of NON-ASCII characters are used to prepare a suitable character set which can be used, lets check the process with the following example
http://काशीपुर.com = http://www.xn--11b6bsw3bni.com/
now अभिषेक.com contains 2 parts अभिषेक and com in which com is already an ASCII string and hence left as it is, अभिषेक is processed by Nameprep and then converted to Punycode to get l1b6a6dvbzbxc which is a meaningless string for most of us, this output is prepended with xn-- to produce xn--l1b6a6dvbzbxc which becomes the first part of the domain name an entry for this (xn--l1b6a6dvbzbxc.com) is made in DNS to map these names with IP Addresses.
IDNs are registered with a limited number of registrars by using their ASCII equivalent strings, currently .com/.net/.info and various other ccTLD are available for registration .org is expected to be available by this month (January 2010) end, ccTLD .in is currently not available for IDNs.
Starting November 2009 ICANN have started registering language-specific TLDs as well and such TLDs are expected to hit the internet somewhere mid-2010, we may soon see some domains with .भारत as TLDs soon if Indian Government applies for such a TLD :)
IDNs are not much popular in India currently but still the domain parking race have already begun for Hindi TLDs for instance domains like भारत.com, पुणे.com and various others are already gone
Use of IDN have opened up new ways for Localization and Internationalization but using IDNs have also raised various ASCII Spoofing concerns due to which various Browsers do not have all the IDN TLDs enabled by default for instance the Newer Versions Firefox does not support .com IDNs by default to enable the same you need to set a parameter "network.IDN.whitelist.com;true" in firefox configuration using about:config, please be careful while doing so this may not be always recommended due to various reasons check this for further information on this.