Loopback address

127.0.0.1 Defined in the Internet RFC's

The proper use of 127.0.0.1 is defined in RFC 3330: Special-Use IPv4 Addresses:

127.0.0.0/8 - This block is assigned for use as the Internet host loopback address. A datagram sent by a higher level protocol to an address anywhere within this block should loop back inside the host. This is ordinarily implemented using only 127.0.0.1/32 for loopback, but no addresses within this block should ever appear on any network anywhere.

The IPv6 version of localhost is defined in RFC 3513: Internet Protocol Version 6 (IPv6) Addressing Architecture as ::1/128.

Routing

(n.) In internetworking, the process of moving a packet of data from source to destination. Routing is usually performed by a dedicated device called a router. Routing is a key feature of the Internet because it enables messages to pass from one computer

to another and eventually reach the target machine. Each intermediary computer performs routing by passing along the message to the next computer. Part of this process involves analyzing a routing table to determine the best path.

Routing is often confused with bridging, which performs a similar function. The principal difference between the two is that bridging occurs at a lower level and is therefore more of a hardware function whereas routing occurs at a higher level where the software component is more important. And because routing occurs at a higher level, it can perform more complex analysis to determine the optimal path for the packet.