Without going into much technical/math detail:
Basically, it is used to determine which part of the IP address represents the network, and which part represents the host (often a computer). This makes it easier for computers and network hardware to know who is talking to who. Similar to going into a numbered room or building (the network) and then finding a specific person (the host), or sending a letter to an apartment complex (network address) at a specific unit number (host address).
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