useful for things like using "client software" to access a server located on the same machine.
basically if you open a web browser on a webserver and type in 127.0.0.1 or localhost it accesses the page on the server w/o traveling the entire network
If your loopback is down you can't communicate with the network. It means your network adapter isn't working. If you ping 127.0.0.1 and get no replies, you have a problem.