When you send a letter from your house to a friend, you have to know the address to send it to so that the postman knows which street and which house to take it to. Computer networks such as the Internet are no different except instead of sending your web traffic to "1145 Main Street"; your computer's location is known as an IP Address.
An IP address is your computer's equivalent of your postal address and just like the mail service, each computer has to have its own address so that it will only receive the information that is meant for it and not anything that is meant for someone else.
While we are used to writing out streets and house numbers on envelopes, inside your computer IP Addresses are usually represented in what is known as dotted-decimal format such as 124.62.112.7 as this is the system that is understood by computers. As you can see, the address is split into 4 sections known as "octets" and each of the four octets can be numbered from 0-255, providing a total of 4,294,967,296 potentially unique IP Addresses.
Now, while 4.2 Billion might seem like a lot, for many years large amounts of these have been allocated and used by large network such as backbone providers, ISPs and large Universities that made up the early Internet While other groups still have been reserved for special purposes and are not usable, so in practice the real amount is far less than 4.2 billion. The problem that we face today is that with many homes owning more than one computer and with cell phones, PDAs and even fridges being enabled for Internet access these days, IP Addresses are running out.
When I mentioned above that some blocks of addresses had been reserved for special purposes, one of these purposes was for private networking and it is these private addresses that help to relieve the pressure on the remaining address space and make possible many of the cable and DSL routers that people have at home today to share their Internet connection amongst many PCs.
Private IP address ranges
The ranges and the amount of usable IP's are as follows:
10.0.0.0 - 10.255.255.255
Addresses: 16,777,216
Addresses: 16,777,216
172.16.0.0 - 172.31.255.255
Addresses: 1,048,576
Addresses: 1,048,576
192.168.0.0 - 192.168.255.255
Addresses: 65,536
Addresses: 65,536
So, what are these addresses and how do they work?
For example, if I had 6 computers that I wanted to network, I might number them from 172.16.0.1 up to 172.16.0.6 and this would still leave over a million more addresses that I could use if I were to buy some more computers or if I was networking a large office and needed lots and lots of addresses.
These blocks of addresses can be used by anyone, anywhere - even if your neighbor is using the exact same addresses this won't cause a problem. This is possible because these addresses are known as "non-Routable addresses" and the devices on the internet that move data from one place to another are specially programmed to recognize these addresses. These devices (known as routers) will recognize that these are private addresses belonging to your network and will never forward your traffic onto the Internet so for your connection to work; you will always require at least one real address from the general pool so that your home router can perform what is known as "Network Address Translation".
NAT is a process where your router changes your private IP Address into a public one so that it can send your traffic over the Internet, keeping track of the changes in the process. When the information comes back to your router, it reverses the change back from a real IP Address into a private one and forwards the traffic back to your computer.
Private addresses and NAT is what makes your home router work and by using them, anyone is able to connect as many computer's as they wish to the Internet without having to worry about running out of addresses and this gives everyone many more years until all the available addresses are used up.