.lib and .dll files

Hello,

I'm sure this is a very simple issue, but it is confusing me a lot right now. So I am writing a program which uses a .dll file and a .lib file. I don't know much about these, but from what I gather, the .lib file is used to create the final .exe, whereas the .dll is left alone as an independent file.

Assuming this is correct, then I tell my compiler (Visual Studio) where to find the .lib file, by specifying "Additional Library Directories" and "Additional Dependencies" in the project properties. However, this is just for the .lib file, and not the .dll files, right?

So, my question is, how does my program know where to find the necessary .dll file when it comes to running the executable? Is there a directory setting similar to "Additional Library Directories" which I need to change?

Thanks!