IP addresses are 32 bit numbers, most commonly represented in dotted decimal notation (xxx.xxx.xxx.xxx). Each decimal number represents eight bits of binary data, and therefore can have a decimal value between 0 and 255. IP addresses most commonly come as class A, B, or C. It's the value of the first number of the IP address that determines the class to which a given IP address belongs. ClassD addresses are used for multi-cast applications.
The range of values for these classes are given below.
Class Range Allocation
A 1-126 N.H.H.H
B 128-191 N.N.H.H
C 192-223 N.N.N.H
D 224-239 Not applicable
N=Network
H=Host
Note 1: 127.0.0.0 is a class A network, but is reserved for use as a loopback address(typically 127.0.0.1).
Note 2: The 0.0.0.0 network is reserved for use as the default route.
Note 3: Class D addresses are used by groups of hosts or routers that share a common characteristic: e.g. all OSPF devices respond to packets sent to address 224.0.0.2
Note 4: Class E addresses exist (240-248),but are reserved for future use.
The class of an address defines which portion of the address identifies the Network number and which portion identifies the Host, as illustrated above, as N and H.
IP addresses are used to deliver packets of data
across a network and have what is termed end-to-end significance. This means
that the source and destination IP address remains constant as the packet
traverses a network. Each time a packet travels, it can match the network
number of the destination IP address.
Subnet Masks
Subnet masks are essential tools in network design,
but can make things more difficult to understand. Subnet masks are used to
split a network into a collection of smaller subnetworks. This may be done to
reduce network traffic on each subnetwork, or to make the internetwork more
manageable as a whole. To all intents and purposes, each subnetwork functions
as if it were an independent network, as far as entries in the routing table
are concerned. The illustration below shows how a routing table looks when
subnet masks are used on a network.

Interface IP Address Subnet mask
E0 150.4.2.1 255.255.255.0
E1 150.4.3.1 255.255.255.0
E2 150.4.1.1 255.255.255.0
How the subnet mask works:
Communication between a node on a local subnetwork
and a node on a different subnetwork is like communication between nodes on two
different networks. To a user, routing between subnetworks is transparent.
Internally, however, the IP software recognizes any IP addresses that are
destined for a subnetwork and sends those packets to the gateway for that
subnetwork.
When subnet masks are used, an IP address is interpreted as follows: [IP address] = [Network address][Subnetwork address][Host address]
This shows that when a network is divided into
subnetworks, the host address portion of the IP address is divided into two
parts, the subnetwork address and the host address.
For example, if a network has the Class B IP
network address portion 129.47, the remainder of the IP address can be divided
into subnetwork addresses and host addresses. This division is controlled by
the network administrator to allow the most flexibility for network development
at the site.
A subnet mask is the mechanism that defines how the
host portion of the IP address is divided into subnetwork addresses and local
host address portions. The subnet mask is a 32-bit, (four byte) number, just as
an IP address is.
To understand the mechanics of the subnet mask, it
is important to know a little of binary arithmetic.
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