For Macs that are on the Ethernet, these Macs can communicate with IP resources directly. For Macs connected on LocalTalk, the Localtalk cannot communicate TCP/IP-just AppleTalk. For these Macs to communicate to IP resources there needs to be something that can translate IP to AppleTalk.
MacIP places the TCP/IP packet inside an AppleTalk packet and sends it to a MacIP gateway which submits the TCP/IP packets on the Macs' behalf. Any replies are taken by the MacIP gateway and placed back into AppleTalk packets and sent to the LocalTalk Mac.
Also some free contiguous addresses will be necessary so the MultiPort/LT can register the LocalTalk and ARA Dial-In Macs on the IP Ethernet.
The rest are optional
There may be times that a MacIP packet would not be coming through the built-in LocalTalk ports. Instead the MacIP packet could be coming from LocalTalk through another non-MacIP router to the ethernet.
The client Macs should be set as follows under MacTCP. For Macs using dynamic addressing (simplest), the port should be LocalTalk with the residing zone selected. Address allocation should be set to Server Mode.