Basically, whenever you make a request to access something from the internet (say, an ad image), it goes to a dedicated server that tells you “Where actually do I find www.website.com” (the answer is, you find it at address 128.129.130.1, this is the IP address). This is the DNS server.

If you tell your phone to use an ad-blocking DNS server - Instead of “normal” ones like e.g. those provided by Google - , whenever it receives such a request to find the address for you, and the address leads to a server that serves ads, it tells you, “Sorry, nothing found here” and the add is not displayed.

Phones, at least Android, have a setting where you can change the DNA server to an ad-blocking one (a different IP of that server).