Single installation with multiple portals will associate each portal with the respective domain by the "portal alias" in DNN itself.  The host header will match it up and then behind the scenes it automatically loads the correct portal based on the domain address (matches against portal alias).  In this regard you can actually have a single portal match up with multiple domains.

As I mentioned before... you don't necessarily *have to* use host headers but it requires a little more knowledge and power behind the scenes to map an external IP address (associated with the domain) to an internal IP address.  A server can have more than one IP address associated with it and have those addresses then mapped to different sites in IIS -- that is, if you went that direction.  I can't personally say how it works because I didn't set up that part of it, but at my day job we do have multiple domains with different IP addresses on the outside all pointing to our single external IP address and then our firewall redirects it to a different IP address (assigned through DNS) internally.  Then we have a server that accepts multiple internal addresses (4 at this point, I believe) on a single NIC and then multiple websites in IIS 6 associate themselves with each IP address respectively. 

Host headers are just easier. :)