Domain names became a thing because its easier to remember them than an ip address, every domain name has an ip address. An example of an ip address could be: 193.236.67.8 Now say you ordered web hosting for domainname.com with a dedicated ip address and this was the ip address for your hosting. domainname.com could be access by typing domainname.com in the browser obviously but also 193.236.67.8 in the url bar will go to domainname.com 193.236.67.8 belongs to domainname.com and only domainname.com making it simple for web crawlers and indexers.

Is a shared ip bad?

There was rumours that having a shared ip could be bad for SEO if websites sharing your ip address where dodgy or malicious but that is no longer the case. A shared ip can be bad if a fellow website with your ip attracts DOS (denial of service) attacks meaning your site is effected too. China also blocks websites they do not see fit for their people and to block a website means blocking its ip address, potentially making your website inaccessible to the Chinese. Generally shared ip hosting is cheaper than having a dedicated ip address but for a few dollars more per month it can be worth it.