Hi Naidu,

On routers, loopback interfaces are used for several purposes, some examples follow:

First, you should have an IP address assigned to the loopback interface.

In OSPF, the loopback inteface with the highest IP address will give the router id, if no router-id is specified under the routing process.

In BGP, you can use the loopback addresses to define the neighbor relationships to increase the stability of the neighbor relationship, if you have several physical paths to the same neighbor. (Loopback intefaces do not go down unless the router goes down, in contrast with physical intefaces that may go down.)

In multicast, generally the loopback interface addresses are used to advertise the Rendez-vous Points for the same stability reason.

Loopback intefaces also can be used for testing purposes when you build a network, because they behave as normal interfaces, i.e. you can ping them, advertise them in routing protocols, etc.

Sometimes I used many loopback intefaces on the same router to test summarization of routes to other routers: I gave subnet numbers to them from a contiguous pool and summarized those subnets to advertise them to other routers. I tested how the router does summarization, what will be the cost of summarized routes, how you can do redistribution etc.

I hope this helps.

Cheers:

Istvan