You can think of a loopback device as a filesystem within a filesystem. It provides a convenient method for working with a filesystem destined for a small device like a floppy.
From the outside, the filesystem is contained within a single file (often gzipped to fit on a floppy). This is often called an image file since it contains a complete image of a filesystem. When mounted, you can access it like any other filesystem.
The kernel requires loopback support. You can compile support directly into the kernel, or as a module.
You also need one or more loop devices. BasicLinux provides four: /dev/loop0 through /dev/loop3.
Mounting a loopback device is simple:
The filesystem looks exactly like a small disk partition, including having a fixed size. Treat it like any other filesystem. When you unmount it, the image file saves any changes you made to the filesystem.
Creating an image is fairly simple: