I've bought my domain at namecheap and I've got a VPS at Network Redux. I just had my VPS reconfigured with CentOS 5.7 (Final) and I'm trying to setup my nameservers/DNS. NR just got back to me with this in the e-mail, I was hoping somewhere here can explain what they are and which option is preferable.

The content of the email:
Do you intend to house DNS locally on the virtual server, from the
registrar, or our DNS cluster.
I have no idea what any of those mean. Thanks!