To participate in wide-area IP networking, a host needs to be configured, either manually by the user or automatically from a source on the network such as a DHCP server. Unfortunately, such external configuration information may not always be available. It is therefore beneficial for a host to be able to depend on a useful subset of IP network to always be functional, even when no configuration information is available. This document describes how a host may automatically configure an interface with an IPv4 address within the 169.254/16 prefix that is valid for communication with other devices connected to the same physical (or logical) link. Communication using Link-Local IPv4 addresses is not suitable for communication with devices not directly connected to the same physical (or logical) link.
Stuart Cheshire, Bernard Aboba, and Erik Guttman (2003, June 3), Dynamic Configuration of Link-Local IPv4 Addresses. Retrieved Septembet 8, 2003, from files.zeroconf.org/ draft-ietf-zeroconf-ipv4-linklocal.txt.