Meaning – The term loopback interface, refers to an interface that bypasses unnecessary communications functions when the information is addressed to an entity within the same system.
A loopback interface is a logical, virtual interface in a Cisco Router. A loopback interface is not a physical interface like a Fast Ethernet interface or Gigabit Ethernet interface.
A loopback interface has many uses. Loopback interface’s IP Address determines a router’s OSPF Router ID. A loopback interface is always up and allows Border GatewayProtocol (BGP) neighborship between two routers to stay up even if one of the outbound physical interfaces connected between the routers is down.
Example of usage – “Loopback interfaces are used as the termination points for Remote Source-Route Bridging (RSRB), and Data-Link Switching Plus (DLSW+). Loopback interfaces are always up and running and always available, even if other physical interfaces in the router are down.”