Avahi is the Linux implementation of Zeroconf. The first paragraph here gives a concise description of Avahi.
Originally Posted by Gareth Edwards
In essence; in the absence of any network configuration (no dhcp or manual configuration) Avahi provides a local LAN IP address. This address the has the first two octets as 169.254. This address is never provided by dhcp and has nothing to do with your ISP.
IMO, the first test would be to see what the IP address of your network card. You can do that by posting the output of this command
...This provides the currently configured IP addresses.
ifconfig|grep 'inet addr'
When I do this I get the following
inet addr:192.168.1.3 Bcast:192.168.1.255 Mask:255.255.255.0
inet addr:127.0.0.1 Mask:255.0.0.0