Private Address Space
The Internet Assigned Numbers Authority (IANA) has reserved the following three blocks of the IP address space for private internets:
10.0.0.0 - 10.255.255.255 (10/8 prefix)
172.16.0.0 - 172.31.255.255 (172.16/12 prefix)
192.168.0.0 - 192.168.255.255 (192.168/16 prefix)
We will refer to the first block as "24-bit block", the second as "20-bit block", and to the third as "16-bit" block. Note that (in pre-CIDR notation) the first block is nothing but a single class A network number, while the second block is a set of 16 contiguous class B network numbers, and third block is a set of 256 contiguous class C network numbers.
An enterprise that decides to use IP addresses out of the address space defined in this document can do so without any coordination with IANA or an Internet registry. The address space can thus be used by many enterprises. Addresses within this private address space will only be unique within the enterprise, or the set of enterprises which choose to cooperate over this space so they may communicate with each other in their own private internet.
As before, any enterprise that needs globally unique address space is required to obtain such addresses from an Internet registry. An enterprise that requests IP addresses for its external connectivity will never be assigned addresses from the blocks defined above.
In order to use private address space, an enterprise needs to determine which hosts do not need to have network layer connectivity outside the enterprise in the foreseeable future and thus could be classified as private. Such hosts will use the private address space defined above. Private hosts can communicate with all other hosts inside the enterprise, both public and private. However, they cannot have IP connectivity to any host outside of the enterprise. While not having external (outside of the enterprise) IP connectivity private hosts can still have access to external services via mediating gateways (e.g., application layer gateways).
All other hosts will be public and will use globally unique address space assigned by an Internet Registry. Public hosts can communicate with other hosts inside the enterprise both public and private and can have IP connectivity to public hosts outside the enterprise. Public hosts do not have connectivity to private hosts of other enterprises.
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http://www.cis.ohio-state.edu/cgi-bin/rfc/rfc1918.html