255.255.0.0 are ways the prefix might be described. We'll use this example network for illustrating points. This means that all the hosts on this subnet have addresses start with 10.0.1. A network like this might be an Ethernet. The next question is how do the hosts get routes in their routing tables.
Every host has a loopback address, which is used for testing.
Packets with the loopback address as a destination address will never leave the machine i.e. they're delivered back to the machine internally. In most cases the loopback address of a machine is 127.0.0.1, and it uses a special interface called the loopback interface which takes the packet off of the outgoing queue, and puts it on the incoming queue rather than transmitting it across the network. Every interface on a host has an address and netmask associated with it. The netmask can be used to determine what hosts are on the subnet accessible through that interface. On machines that do have default routes, the route is either manually configured or found by a Router Discovery protocol.