Link-Local addressing is a protocol by which computers or other devices on a network, such as the AirPort Base Station, can self-assign IP addresses that are valid for their local network but not globally routable. Link-Local addresses are all in the 169.254/16 network. Recent versions of Mac OS and Microsoft Windows configured to get an address via DHCP will resort to choosing a Link-Local IP address if no DHCP server responds to their queries.
When a DHCP server is not present, an AirPort Base Station (Dual-Ethernet) with 4.0.4 or later firmware will self-assign a unique 169.254.x.x address (where "x" may be any number from 1 to 255). Link-Local addressing guarantees that you can always find the base station on a known subnet. This means that scans made by AirPort Admin Utility will be more reliable. With earlier base station firmware versions, a base station that could not get an IP address defaulted to an Apple-reserved address of 192.42.249.13 or 192.42.249.12. In some cases it was difficult to connect to such a base station.
This type of addressing is also a useful feature when connecting to a base station that has been "hard" reset. The default IP address of a hard-reset base station is:
LAN Port: 10.0.1.1
WAN Port: 169.254.x.x