DDE is different from the clipboard data-transfer component that is also part of this operating system. The clipboard is almost always used as a one-time response to a specific action by the user, such as choosing Paste from a menu. DDE, on the other hand, is often initiated by a user but typically continues without the user's further involvement. DDE is separate from and does not use the clipboard.

DDE always takes place between two applications: a client application and a server application. The client initiates the exchange by requesting that the server perform a particular action, such as supply data. The client's request to the server is called a transaction. If it is able, the server responds by performing the requested action. The important distinction between a client and a server is that the client always initiates DDE transactions.

A server can have many clients simultaneously, and a client can request data from multiple servers. An application can be both a client and a server at the same time. For example, one application could receive data from another application as a client and then act as a server by passing the data to yet another application.