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This setting merely controls whether a DHCP server should update ‘A’ record or not.
The label “Always dynamically update DNS A and PTR records” is misleading since it applies only for the clients that request a DNS update.
This is the simplest and most reliable solution of the available options.
This method makes use of DHCP option 81 as defined in RFC4702, which is used to convey a client’s FQDN to a DHCP server as part of DHCP process.
Looking at a capture from a Windows PC joined to domain, one can see the Windows Device sending Update request with GSS-TSIG resource.
What happens if we select the option to “Always dynamically update DNS A and PTR records”? If you trigger a DHCP request from the client, you will notice that this doesn’t work.
By default, a client is responsible for updating the A record and DHCP server is responsible for updating the PTR record.
Selecting the second option forces DHCP server to update A record as well.
In a traditional windows environment with AD, this process is taken care by client OS.
Every time a Windows PC gets an IP address from DHCP server, it would send a DNS Update (Opcode = 5) request to its registered DNS server.