Automatic Private IP Addressing (APIPA) allows home users and small business users to create a functioning, single subnet TCP/IP network without the use of either static addressing or a DHCP server.

Manually configuring IP addresses can be tedious work in all but the very smallest networks and is prone to human error. Generally, autoconfiguration is a better choice. APIPA allows a Windows XP Professional client to assign itself an IP address in the following circumstances:

The client is configured to obtain a lease DHCP, but a DHCP server cannot be found, is unavailable, or is not used (for example, in a small office/home office network).
The client used DHCP to obtain a lease, but the client's attempts to renew the lease through a DHCP server have failed.
In these cases, the Windows XP Professional client selects an IP address from the range of IANA-designated, private class B addresses (169.254.0.1 - 169.254.255.254) with the subnet mask 255.255.0.0. The client performs duplicate-address detection to ensure that the IP address that it has chosen is not already in use. If the address is in use, the client will select another IP address up to 10 times. After the client has selected an address that is verifiably not in use, it configures the interface with that address. In the background, the client continues to check for a DHCP server every five minutes. If a DHCP server is found, the APIPA autoconfiguration information is abandoned and the configuration offered by the DHCP server is used instead.