The DNS and DHCP scheme is very complicated.

torouter itself (the base configuration) uses the OpenDNS servers, as
configured in /etc/resolv.conf.

Seperate dnsmasq configurations and init scripts are used for local ethernet
and the transparently tor-ified wifi access point. The "regular" dnsmasq daemon
is disabled (in /etc/default/dnsmasq). The ethernet daemon makes upstream
requests "as usual" (according to /etc/resolve.conf), while the wifi daemon
makes upstream requests to ttdnsd on port 5354.

ttdnsd is used to make upstream requests locally via Tor on port 5353. It is
configured in /etc/default/ttdnsd and listens for requests on port 5354.

Tor is configured (in /etc/tor/torrc) to listen locally on port 5353 of address
172.16.23.1.

The /etc/network/interfaces file makes pre- and post- interface configuration
calls to (re) start the tor, ttdnsd, and dnsmasq daemons.