Explanation of the IPv4 address assignment using Ethernet.

The IPv4 address for the Ethernet network interface is assigned in several ways using the following modes:

Static IP
The IP address, network mask and default gateway are configured manually in the system configuration file. However, it is possible to change the IP address at runtime. The static configuration specifies also a primary and optional secondary DNS server. To make use of the static IP configuration, you need to disable DHCP.
Dynamic Host Configuration Protocol (DHCP)
This mode is mostly used. It requires a centralized DHCP server in the local area network (LAN). DHCP server maintains a database of leased IP addresses, and assigns to the client an unused IP address. It specifies also a network mask and a default gateway to use, when the system wants to access the Internet. The DHCP server specifies also a primary and optional secondary DNS server. The DNS server is used to resolve the IP address for a known host name.
AutoIP
The system tries the DHCP mode first. If it fails after a 60 seconds timeout, then the system starts an auto-configuration mode (AutoIP mode). It randomly selects an IP address and starts using it when the address is free. Otherwise, the system tries a different random IP address. In this mode, an IP address and network mask are assigned. The default gateway is not assigned, because it is not known. Connecting to the Internet is thus not possible from the AutoIP mode. The IP address is picked from the link-local IP address block (169.254.1.0 - 169.254.254.255). The network mask is 255.255.0.0.

Note

The AutoIP mode is an extension of the DHCP mode. As a consequence, the AutoIP mode is enabled permanently with DHCP and cannot be enabled or disabled manually.
In AutoIP mode, a DHCP client is still trying to obtain an IP address every 120 seconds. On success, the IP address is re-assigned. The system then starts using a new, DHCP-assigned IP address and the mode is changed back to DHCP mode.
All available functions for using Ethernet are explained in Ethernet Interface.