The technique was originally used to avoid the need to assign a new address to every host when a network was moved, or when the upstream Internet service provider was replaced, but could not route the networks address space. It has become a popular and essential tool in conserving global address space in the face of IPv4 address exhaustion. One Internet-routable IP address of a NAT gateway can be used for an entire private network.

IP masquerading is a technique that hides an entire IP address space, usually consisting of private IP addresses, behind a single IP address in another, usually public address space. The hidden addresses are changed into a single (public) IP address as the source address of the outgoing IP packets so they appear as originating not from the hidden host but from the routing device itself. Because of the popularity of this technique to conserve IPv4 address space, the term NAT has become virtually synonymous with IP masquerading.

As network address translation modifies the IP address information in packets, NAT implementations may vary in their specific behavior in various addressing cases and their effect on network traffic. The specifics of NAT behavior are not commonly documented by vendors of equipment containing NAT implementations.