IP aliases are referred to this way because they are alternative IP numbers for a network device. Some software packages can use alternate configurations based on the target IP number of a request. Web (httpd) servers and the virtual POP e-mail server distributed with Linuxconf are the most notable examples.
An alias is associated with a network device. Linuxconf provides you with a list of active network devices (aliases can only be defined for active devices). Although any active device may be chosen, it is often simpler to pick one of the Ethernet devices (eth0) of the computer. Furthermore, using IP numbers originating from the same network number as the primary IP number of the device will simplify routing.
You don't have to tell any other machine on the network about what you're doing. It just works.
If you pick IP numbers unrelated to the network of the Ethernet device, you will need to define special routing on the other hosts of the network. Your server will look like a gateway to a "virtual network." This is often done in practice when you need a huge amount of aliases, exceeding the available numbers on the local network.
Once you have selected a network device, you are taken into a simple dialog with many empty lines. Just enter the aliases (IP numbers) you wish to associate with this device. If you need more empty lines, use the Add button.