The IP address is divided into two parts, the network and the host. The Hosts are then further divided into subnets and hosts.
A nice picture can be seen here:
http://www.answers.com/topic/ip-address
I've heard the analogy of a telephone number. The first three numbers are the area code and round down the area, then the next three numbers round it down more, and so on until the specific phone is reached.
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Ryan
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