For years, the Internet has been growing at an alarming pace. The proliferation of the 'dot com' and e-commerce companies caused a huge surge in the use of Internet Protocol (IP) addresses, and an increase in the number of destinations on the Internet. Each destination has a range of IP addresses associated with it (a 'block of IP's' in NetSpeak).
Routers use routing protocols such as BGP exchange information about how to reach these destinations. As the number of destinations grew, so did the number of routes (paths) to reach these networks. Soon, it became clear that the routers couldn't store the growing number of routes, they also couldn't handle the optimum path calclulations much longer, and the IP address space was being handed out far too quickly because it was carved into large classful blocks.
CIDR: SUBNETTING, SUPERNETTING AND ROUTE AGGREGATION
The soluton to the depletion of IP addresses and the proliferation of the number of routes was two fold. ARIN used a three-pronged solution to this problem.
To reduce the number of routes in the Internet backbone, supernetting was used to aggregate destinations together into larger blocks of IP's. Larger blocks of IP's would only be allocated to the ISP's. The ISP's were, in turn, expected to aggregate their routes so that routing protocols could make fewer announcements of larger blocks. Of course, this created other problems for customers who were wise enough to not count on a single ISP for their Internet access...
ROUTE AGGREGATION
ARIN recommended that all backbone Internet providers combine or 'aggregate' their routes to reduce the total number of routes being advertised. ARIN further recommended that all companies and organizations wishing to connect to the Internet request IP addresses from their Internet provider instead of ARIN.
If a company gets a small block of IP addresses from the larger block of IP addresses owned by their upstream provider, their provider can more easilly aggregate those routes because the customer's IP addresses originally came from the larger block of IP addresses owned by the Internet provider.