Domain: Domain is listed as a requirement in the Dynamics GP 2010 installation manual, however, as Peer to Peer environments are now supported with Dynamics GP, technically a domain is not needed. That said, it is recommended that all client and server computers are joined to a domain.
Name resolution: Name resolution needs to be used so that each computer is indentified by a unique host name. Internally handled resolution is recommended for the most reliable Dynamics GP performance.
Recently, Microsoft added Peer to Peer Environment to the supported list of configurations. From our experience a Peer to Peer Environment is not recommended for Dynamics GP implementations.