To overcome the 16‑bit limitation of its registers while still addressing 1 MB of memory, the 8086 employs a segmented memory model.
In this scheme, the BIU forms memory addresses are formed by shifting a 16‑bit segment register four bits to the left and then adding a 16‑bit offset. This results in a 20‑bit physical address.
Although this model can be seen as complex, it allowed small programs (fitting within a 64‑KB segment) to be loaded at a fixed offset, simplifying relocation in many cases.