Virtual IP address
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A virtual IP address (VIP) is an IP address that is not connected to a specific computer or network interface card (NIC) on a computer. Incoming packets are sent to the VIP address, but all packets travel through real network interfaces.
VIPs are mostly used for connection redundancy; a VIP address may still be available if a computer or NIC fails because an alternative computer or NIC replies to connections.
[edit] Example
An example of a virtual IP address is a loopback (circuitless IP address) as the IP address is not associated with any one particular interface (or circuit) on the host or route. Localhost is an example of the application of a loopback which, in turn, is an example of a circuitless IP address other-wise known as a virtual IP address.
Virtual IPs can be used in RAC setup as well(in case of 10g RAC).