The significance of the Internet Protocol (IP) address lies in its function as a unique identifier assigned to each device connected to a network. An IP address enables devices to communicate and exchange data over the internet. It is crucial for routing traffic effectively, allowing the transfer of information to the correct destination. There are two main versions: IPv4 and IPv6, with the latter providing a much larger address space due to the growing number of devices. IP addresses play a key role in establishing network connectivity.