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  The 8086 is a 16-bit microprocessor and cannot therefore work directly
  with numbers larger than 16 bits. Theoretically, this means that the 8086
  should be able to access only 64 KB of memory. But, as we noted in the
  previous chapter, it can in fact access much more than that--1024 KB to be
  exact. This is possible because of the 20-bit addressing scheme used with
  the 8086, which expands the full range of memory locations that the 8086
  can work with from 216 (65,536) to 220 (1,048,576). But the 8086 is
  still limited by its 16-bit processing capacity. To access the 20-bit
  addresses, it must use an addressing method that fits into the 16-bit
  format.