There really isn’t a concept of a link-local address in IPv4, but it is critical for IPv6 operation. As the name implies, link-local addresses are significant only on a particular link, and they are the primary vehicle of communication between IPv6 hosts over a shared link. As an illustration of its importance, OSPFv3 will not even function without link-local addresses being present.
Link Local addresses are all within the FE80::/10 range. They can be manually set (which is the Cisco recommended practice), or they can be created automatically based on the node’s MAC address for that link. The problem with using a MAC, however, is that it is only 48 bits, while an IPv6 address is 128 bits. To solve this problem, extra padding is used. The rule is that you cut the MAC address in half, and insert “fffe” where you made the cut. For example, if you had the MAC address of 1111.2222.3333, the padding would work like this:
As if that isn’t complicated enough, one additional change has to be made called the EUI-64 bit flip. I won’t go through explaining it because there is a lesson on it. The final result using the bit flip would be: