There are really two kinds of devices that are referred to as loop<something>. The one that you mention is the network loopback interface. This is a virtual network interface. It is only a software device. It is often used to get a web browser to connect to the web server on the same machine. It is also used for diagnostics and for software development. If you run the ifconfig command you will see that one of the "interfaces" is named lo. That is the loopback network interface.
lo Link encap:Local Loopback
inet addr:127.0.0.1 Mask:255.0.0.0
UP LOOPBACK RUNNING MTU:16436 Metric:1
RX packets:3006 errors:0 dropped:0 overruns:0 frame:0
TX packets:3006 errors:0 dropped:0 overruns:0 carrier:0
RX bytes:150396 (146.8 Kb) TX bytes:150396 (146.8 Kb)
As long as I mentioned that there are more loop<something> devices I may as well mention the other type. These are also virtual devices. They are addressed by way of the files in /dev/loop? where ? is a number. One use for these is to mount an iso file as a disk. For instance if you have an iso file called $HOME/my.iso you can mount it on /mnt with the following command.
$ mount -o loop $HOME/my.iso /mnt
Then you can look into the iso file just as if it were a mounted disk.
If you try to write into the iso image you may or may not destroy the file structure.