So, we have internal networks (LAN) and a large "external" network which combines them together (the WAN). And like in the phone system, every node (host) on the network has a "number", or an address.

However, as covered here, we do not have an infinity of numbers (addresses) to give out. Each subnet has a finite size.

If we have an office with 150 phone extensions, do we also need to lease 150 phone lines so that each extension would have a number? Of course not -- the extensions get internal numbers, from the internal phone system. We can have just 10 "real" phone lines for this office, and all of the internal phones would use them. You would just hit "9" on a phone and get an outside line.

This also means that the internal extension numbers are under local control (the local administrator assigns them), and they don't cost anything. This is because they can be repeated over and over in different offices -- every office can have an internal extension numbered "101". But only one office can have a "real" phone number like (343) 553-7592.

This is exactly the same for a LAN. Inside a LAN subnet, the computers use "internal" IP addresses. These are specific address ranges which can repeat over and over across many different networks. For instance, all addresses which begin with 192.168.x.x are internal addresses -- they are reserved for use inside of LANs. If you search all across the Internet (the huge WAN we all share) for such an address (like, a website running on 192.168.0.100), you will never find it, as this address is not allowed for "public" use.

The following table shows the address ranges specifically reserved for use on a LAN. These are also sometimes called 'non-routable addresses', as they cannot be used to reach other computers in other subnets (i.e, they cannot get across a router, which is a device for connecting two subnets).

 Start Address End Address Number of Individual IP Addresses 192.168.0.0 192.168.255.255 65,536 172.166.0.0 172.31.255.255 1,048,576 10.0.0.0 10.255.255.255 16,777,216