Manual:$IP

Setting this variable was neccessary to run older versions of MediaWiki. However at least since MediaWiki 1.18, setting $IP in LocalSettings.php is no longer needed.

Details
IP stands for Install Path. The variable holds the local file path to the base installation of your wiki. Make sure you refer to the fully qualified file path. Do not include a slash at the end of the path.

In MediaWiki 1.16 and prior, where the 'DefaultSettings.php' file still had to be loaded from inside LocalSettings.php, the directory to load it from was determined by the IP variable.

Unlike other variables, that setting is not found in DefaultSettings.php, it had to be set in LocalSettings.php (at a place before DefaultSettings.php was loaded). This was one of the few settings (along with the DB settings) that had to be set in order for MediaWiki to run.