The loopback IP range starts at and reaches to The IP stack automatically short-circuits any packets that are sent to a loopback IP, and never puts them onto a real network. Instead, the packets get routed to the localhost, the network interface that the packets were sent from.

The loopback IP exists independently of any of the interfaces contactable IP addresses, and is always available, even if the interface is down (this is due to the fact that the packets sent to a loopback IP are intercepted in the software TCP/IP stack, and never makes it to the hardware interface).
This is just configured like any other route in your routing table. In the same manner that you add a route for whatever network you're on when you configure a new interface, you do the same for the loopback interface. This is by no means an automatic function of the TCP/IP stack, although many systems will be configured by a third party to do it for you.

Example, windows NT:

C:\> route print
<Irrelevant bits skipped>
Network Destination       Netmask        Gateway     Interface     Metric

In human readable form, this translates as "route all packets destined for 127.* via the interface configured with the IP address"

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