MAC addresses
You can't mail a letter without knowing where to send it. The same is true for networks. Every device that can connect to another has a special code burned into the compnent they interact with the network with called a MAC (Media Access Controll) address. This MAC address is globally unique, and cannot be changed.
Internet Protocol addresses
IP addresses function similar to MAC addresses, but function at a higher level. They allow for internetwork transmissions to occur, similar to the post office sending a package to someone in another country. They are formatted in the following fashion:
00000000.00000000.000000000.00000000
With each 0 being a bit (NOTE: it can also be a 1). They have two parts, the network space and the host space. Continuing the mail analogy, the network space is the other country where your friend lives, and the host space is their street address. The computer is able to tell these two apart using a subnet mask.