It looks like they are doing DNS wildcarding and basic round-robin DNS-based load balancing.

My guess would be that for particular subdomains (om, cbs, etc.) they may be offering some stats on clicks, referrers, etc., so that those users can better track that sort of stuff.

But, the easiest way to manage this DNS-wise is to use wildcards. The side effect is that any subdomain becomes valid, but that's usually no issue.

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brks-macbook-pro:Downloads brk$ ping om.bit.ly

PING om.bit.ly (128.121.254.129): 56 data bytes
64 bytes from 128.121.254.129: icmp_seq=0 ttl=57 time=69.395 ms
64 bytes from 128.121.254.129: icmp_seq=1 ttl=57 time=69.584 ms
^C

--- om.bit.ly ping statistics ---
2 packets transmitted, 2 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.395/69.489/69.584/0.095 ms

brks-macbook-pro:Downloads brk$ ping cbs.bit.ly

PING cbs.bit.ly (168.143.174.25): 56 data bytes
64 bytes from 168.143.174.25: icmp_seq=0 ttl=57 time=69.898 ms
64 bytes from 168.143.174.25: icmp_seq=1 ttl=57 time=69.625 ms
64 bytes from 168.143.174.25: icmp_seq=2 ttl=57 time=69.815 ms
^C

--- cbs.bit.ly ping statistics ---
3 packets transmitted, 3 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.625/69.779/69.898/0.114 ms

brks-macbook-pro:Downloads brk$ ping foo.bit.ly

PING foo.bit.ly (128.121.254.129): 56 data bytes
64 bytes from 128.121.254.129: icmp_seq=0 ttl=57 time=70.048 ms
64 bytes from 128.121.254.129: icmp_seq=1 ttl=57 time=69.509 ms
64 bytes from 128.121.254.129: icmp_seq=2 ttl=57 time=70.003 ms
^C

--- foo.bit.ly ping statistics ---

3 packets transmitted, 3 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.509/69.853/70.048/0.244 ms

brks-macbook-pro:Downloads brk$ ping brk.bit.ly

PING brk.bit.ly (168.143.174.25): 56 data bytes
64 bytes from 168.143.174.25: icmp_seq=0 ttl=57 time=69.191 ms
64 bytes from 168.143.174.25: icmp_seq=1 ttl=57 time=69.489 ms
64 bytes from 168.143.174.25: icmp_seq=2 ttl=57 time=72.154 ms
^C

--- brk.bit.ly ping statistics ---

3 packets transmitted, 3 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.191/70.278/72.154/1.332 ms

brks-macbook-pro:Downloads brk$ ping 123.bit.ly

PING 123.bit.ly (128.121.254.201): 56 data bytes
64 bytes from 128.121.254.201: icmp_seq=0 ttl=57 time=69.376 ms
64 bytes from 128.121.254.201: icmp_seq=1 ttl=57 time=70.049 ms
64 bytes from 128.121.254.201: icmp_seq=2 ttl=57 time=75.750 ms
^C

--- 123.bit.ly ping statistics ---

3 packets transmitted, 3 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.376/71.725/75.750/2.859 ms

brks-macbook-pro:Downloads brk$ ping 456.bit.ly

PING 456.bit.ly (168.143.174.25): 56 data bytes
64 bytes from 168.143.174.25: icmp_seq=0 ttl=57 time=69.185 ms
64 bytes from 168.143.174.25: icmp_seq=1 ttl=57 time=69.917 ms
64 bytes from 168.143.174.25: icmp_seq=2 ttl=57 time=69.663 ms
^C

--- 456.bit.ly ping statistics ---

3 packets transmitted, 3 packets received, 0% packet loss
round-trip min/avg/max/stddev = 69.185/69.588/69.917/0.303 ms
brks-macbook-pro:Downloads brk$

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Also, sub-sub-domains work:

brks-macbook-pro:Downloads brk$ ping ntr.brk.bit.ly

PING ntr.brk.bit.ly (168.143.174.29): 56 data bytes
64 bytes from 168.143.174.29: icmp_seq=0 ttl=57 time=70.208 ms
64 bytes from 168.143.174.29: icmp_seq=1 ttl=57 time=68.510 ms

http://ntr.brk.bit.ly/xyz