Real mode is a mode of operation for x86 CPU’s. Real mode is also called real address mode, because all memory address references are to actual addresses in hardware. This means all programs share one big address space; There is no protection in place to prevent one program from accessing the memory of another program.

Real mode used to be the only mode of operation but now there is protected mode which provides a virtual address space for each program.

In real mode on the 8086 processor, you have 20 bit address space (1MB). This is used collectively by all programs. The way you address memory is by a segmented addressing scheme in which you provide a 16bit segment number which gets converted into the base address of the segment you want to address but left shifting the value 4 bits adding 4 0s in the least significant 4 bytes of the number. Then the 16bit offset value is added giving you an address in the referenced segment. This actually allows for more than 20bits of addressable memory so to cope with that, the value is taken to the modulo of 2^20 to wrap the address around to the beginning.

An example of this would be:
Code Segment (CS) register: 0xF11A
Offset: 0x3A
CS register left shift: 0xF11A0
Real Address: 0xF11A0+0x3A = 0xF11DA