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.
Network address translation
IP masquerading is a technique that hides an entire IP address space, usually consisting of private IP addresses, behind a single IP address in another, usually public address space. The address that has to be hidden is changed into a single (public) IP address as "new" source address of the outgoing IP packet so it appears as originating not from the hidden host but from the routing device itself. Because of the popularity of this technique to conserve IPv4 address space, the term "NAT" has become virtually synonymous with IP masquerading.