127.0.0.1, being the first
IP address on the
127.0.0.0/8 netblock reserved for
loopback use, is the address most commonly used for a loopback network interface. Every properly functioning
TCP/IP network stack has one of these -- it is an address reserved for the host to use when talking to itself.
If you ping 127.0.0.1, you should always get a response, with a truly minuscule latency. This is because packets sent to the loopback don't have to transit any actual network -- they go down the kernel network stack to Layer 2 and come right back. If you have a Web server running on your host, you can often test it out at http://127.0.0.1/. Pranksters may sometimes suggest that address as a place to look for warez or pr0n ....
Under no circumstances should you disable the loopback interface whilst connected to the Internet. On some systems, this may cause your kernel routing table to direct packets for 127.0.0.1 out one of your real network interfaces, where they will become unroutable "martian" packets.
On BSD systems such as Mac OS X, the interface bearing this address is usually named lo0, for "loopback interface zero". On Linux systems, it's lo -- plain lo, as Nabokov might have it.