The definition of IP goes on as follows:
Each computer (known as a host) on the Internet has at least one IP address that uniquely identifies it from all other computers on the Internet. When you send or receive data (for example, an email or a Web page), the message gets divided into little chunks called packets. Each of these packets contains both the sender's Internet address and the receiver's address. Any packet is sent first to a gateway computer that understands a small part of the Internet. The gateway computer reads the destination address and forwards the packet to an adjacent gateway that in turn reads the destination address and so forth across the Internet until one gateway recognizes the packet as belonging to a computer within its immediate neighborhood or domain. That gateway then forwards the packet directly to the computer whose address is specified.
A more complete answer can be found on WhatIs.com under the Internet Protocol definition.
You should be aware that several versions of the protocol exist -- the latest of which is version 6 or IPv6. SearchNetworking.com's sister site, SearchEnterpriseWAN.com has an entire Web page devoted to IPv6 topics to help you understand IPv6 concepts, like security and IP addressing.
If you would like to get your feet wet on designing IP networks, I highly recommend this step-by-step tutorial on IP network design. Here you will be able to design an IP-based network so that you will have enough to support your network as it grows.
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