Had this under my old laptop casing:
Windows 2000–based clients can automatically configure an IP address and subnet mask if a DHCP server is unavailable at system start time. This feature, Automatic Private IP Addressing (APIPA), is useful for clients on small private networks, such as a small-business office, a home office, or a remote access client.
The Windows 2000 DHCP client service goes through the following process to auto-configure the client:
The DHCP client attempts to locate a DHCP server and obtain an address and configuration.
If a DHCP server cannot be found or does not respond, the DHCP client auto-configures its IP address and subnet mask using a selected address from the Microsoft-reserved Class B network, 169.254.0.0, with the subnet mask 255.255.0.0. The DHCP client tests for an address conflict to make sure that the IP address it has chosen is not already in use on the network. If a conflict is found, the client selects another IP address. The client will retry auto-configuration for up to 10 addresses.
Once the DHCP client succeeds in self-selecting an address, it configures its network interface with the IP address. The client then continues, in the background, to check for a DHCP server every 5 minutes. If a DHCP server is found later, the client abandons its auto-configured information. The DHCP client then uses an address offered by the DHCP server (and any other provided DHCP option information) to update its IP configuration settings.
If the DHCP client had previously obtained a lease from a DHCP server:
If the clients lease is still valid (not expired) at system start time, the client will try to renew its lease.
If, during the renewal attempt, the client fails to locate any DHCP server, it will attempt to ping the default gateway listed in the lease, and proceed in one of the following ways:
If the ping is successful, the DHCP client assumes that it is still located on the same network where it obtained its current lease, and continue to use the lease. By default, the client will then attempt, in the background, to renew its lease when 50 percent of its assigned lease time has expired.
If the ping fails, the DHCP client assumes that it has been moved to a network where DHCP services are not available. The client then auto-configures its IP address as described previously. Once the client is auto-configured, every 5 minutes it attempts to locate a DHCP server and obtain a lease.