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Some good threads provided by unSpawn. I'll try to explain a little on how the time is adjusted for DST. I researched this last year to adjust an old system I keep around.
Depending on how you set up your system the system clock will either be set to UTC or localtime. The only instance when that time actually changes will be if you are using ntp or you adjust it manually with the bios or hwclock command. The system clock does not change when DST kicks in or out.
The time shown or used by an individual user can be set with the TZ environment variable. For example someone in Tokyo can see their localtime when working on a machine in Cleveland. If this environment variable is not set it will default to the timezone indicated by the file /etc/localtime.
The individual zoneinfo files are located in /usr/share/zoneinfo. As unSpawn mentioned these are supplied by the tzdata package. It is common to set up a symlink with one of these files and /etc/localtime. I've also seen where the desired zoneinfo file is copied to /etc/localtime. These files have timezone rules and automatically make adjustments to the time shown to a user.
As long as you keep the zoneinfo files updated you will not have any problems with DST. It is also possible to create your own zoneinfo file. If for example someone has a unique situation and new information about their timezone had not been updated in the tzdata package they could build the necessary zoneinfo file using zic. You can see the rules for any zoneinfo file using the command zdump.