*** Improved on 12/26/07 by Wrobinson ***
If a computer is unable to reach or obtain a DHCP lease from a DHCP server during boot, APIPA will not help it very much. This is more useful in environments where there is no DHCP server. The best course of action for environments where there is a DHCP server is to disable APIPA. The only way in which this can be effective in a DHCP environment is if the DHCP scopes used are consistent with the APIPA range. Furthermore, if you disable this feature, DHCP clients will retain their existing IP address as long as it has not expired. Review the following MSKB article for more information.
*** End update ***
A Windows-based computer that is configured to use DHCP can automatically assign itself an Internet Protocol address if a DHCP server is not available. For example, this could occur on a network without a DHCP server, or on a network if a DHCP server is temporarily down for maintenance.
With this feature, a Windows computer can assign itself an Internet Protocol address in the event that a DHCP server is not available or does not exist on the network. This feature makes configuring and supporting a small Local Area Network running TCP/IP less difficult
The Internet Assigned Numbers Authority (IANA) has reserved 169.254.0.0-169.254.255.255 for Automatic Private IP Addressing.
After the network adapter has been assigned an IP address, the computer can use TCP/IP to communicate with any other computer that is connected to the same LAN and that is also configured for APIPA or has the IP address manually set to the 169.254.x.y (where x.y is the client’s unique identifier) address range with a subnet mask of 255.255.0.0. Note that the computer cannot communicate with computers on other subnets, or with computers that do not use automatic private IP addressing. Automatic private IP addressing is enabled by default.
Examples of Where APIPA May Be Useful
When your Windows-based computer (configured for DHCP) is initializing, it broadcasts three or more “discover” messages. If a DHCP server does not respond after several discover messages are broadcast, the Windows computer assigns itself a Class B (APIPA) address. Then the Windows computer will display an error message to the user of the computer (providing it has never been assigned an IP address from a DHCP server in the past). The Windows computer will then send out a Discover message every three minutes in an attempt to establish communications with a DHCP server.
How to use automatic TCP/IP addressing without a DHCP server.