The loopback IP address is the address used to access itself.
A loopback interface is also known as a virtual IP, which does not associate with hardware interface.
The loopback address is used to test network software:
A good example of this is to access the web server running on itself by using http://127.0.0.1 or http://localhost.
A loopback adapter is required then if:
Dynamic Host Configuration Protocol (DHCP) assigns dynamic IP addresses on a network. Dynamic addressing allows a computer to have a different IP address each time it connects to the network. In some cases, the IP address can change while the computer is still connected. You can have a mixture of static and dynamic IP addressing in a DHCP system.
In a DHCP setup, the software tracks IP addresses, which simplifies network administration. This lets you add a new computer to the network without having to manually assign that computer a unique IP address. However, before installing an application onto a computer that uses the DHCP protocol, you need to install a loopback adapter to assign a local IP address to that computer.