For any two systems to communicate, they must be able to identify and locate each other. While these addresses in Figure are not actual network addresses, they represent and show the concept of address grouping. This uses the A or B to identify the network and the number sequence to identify the individual host.

A computer may be connected to more than one network. In this situation, the system must be given more than one address. Each address will identify the connection of the computer to a different network. A device is not said to have an address, but that each of the connection points, or interfaces, on that device has an address to a network. This will allow other computers to locate the device on that particular network. The combination of letter (network address) and the number (host address) create a unique address for each device on the network. Each computer in a TCP/IP network must be given a unique identifier, or IP address. This address, operating at Layer 3, allows one computer to locate another computer on a network. All computers also have a unique physical address, known as a MAC address. These are assigned by the manufacturer of the network interface card. MAC addresses operate at Layer 2 of the OSI model.

An IP address is a 32-bit sequence of 1s and 0s. Figure shows a sample 32-bit number. To make the IP address easier to use, the address is usually written as four decimal numbers separated by periods. For example, an IP address of one computer is 192.168.1.2. Another computer might have the address 128.10.2.1. This way of writing the address is called the dotted decimal format. In this notation, each IP address is written as four parts separated by periods, or dots. Each part of the address is called an octet because it is made up of eight binary digits. For example, the IP address 192.168.1.8 would be 11000000.10101000.00000001.00001000 in binary notation. The dotted decimal notation is an easier method to understand than the binary ones and zeros method. This dotted decimal notation also prevents a large number of transposition errors that would result if only the binary numbers were used.

Using dotted decimal allows number patterns to be more easily understood. Both the binary and decimal numbers in Figure represent the same values, but it is easier to see in dotted decimal notation. This is one of the common problems found in working directly with binary number. The long strings of repeated ones and zeros make transposition and omission errors more likely. 

It is easy to see the relationship between the numbers 192.168.1.8 and 192.168.1.9, where 11000000.10101000.00000001.00001000 and 11000000.10101000.00000001.00001001 are not as easy to recognize. Looking at the binary, it is almost impossible to see that they are consecutive numbers.

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