In a "recursive" lookup, the DNS server is always expected to find the definitive answer for any query. Sometimes the response to a lookup is not the actual answer, but a pointer to another name server which might know the answer. A non-recursive DNS server simply returns this pointer, rather than the final answer. A recursive DNS server contacts the new name server and asks it the original question, and repeats the process until the answer is found.
MacDNS 1.0.x functions as a "forwarding" name server. In order to resolve a name which is outside of the domain(s) it serves, MacDNS forwards the request to a parent DNS server, which then performs a recursive lookup. Normally, this parent server is your ISP's DNS server. MacDNS does not perform the recursion itself. However, from the perspective of a DNS client, recursive service is delivered.