When you create an instance, the instance is automatically attached to a virtual network interface card (VNIC) in the cloud network's subnet and given a private IP address from the subnet's CIDR. You can let the IP address be automatically assigned, or you can specify a particular address of your choice. The private IP address lets instances within the cloud network communicate with each other.
Reference:
https://docs.cloud.oracle.com/en-us/iaas/Content/Compute/Tasks/launchinginstance.htm Instances use IP addresses for communication. Each instance has at least one private IP address and optionally one or more public IP addresses. A private IP address enables the instance to communicate with other instances inside the VCN, or with hosts in your on-premises network (via an IPSec VPN or Oracle Cloud Infrastructure FastConnect). A public IP address enables the instance to communicate with hosts on the internet.