IP address
An IP address serves two principal functions. It identifies the host, or more specifically its network interface, and it provides the location of the host in the network, and thus the capability of establishing a path to that host. Its role has been characterized as follows: "A name indicates what we seek. An address indicates where it is. A route indicates how to get there."
The header of each IP packet contains the IP address of the sending host, and that of the destination host.
Classless Inter-Domain Routing
IP addresses are described as consisting of two groups of bits in the address: the most significant bits are the network prefix, which identifies a whole network or subnet, and the least significant set forms the "host identifier", which specifies a particular interface of a host on that network. This division is used as the basis of traffic routing between IP networks and for address allocation policies.