You might be familiar with DHCP, in which a server dynamically assigns IP addresses to devices on a network. But you might not be aware that Windows CE has a fall-back, automatic IP address assignment scheme if a DHCP server is not available.
In short, this feature assigns the device an address of 169.254.0.0 and a subnet of 255.255.0.0 if a DHCP server doesn't respond. If that address is already taken, CE tries up to ten other addresses within the 169.254.xx.xx subnet.