The USPS has formalized a standard addressing scheme for all domestic mail. Many will of course recognize this as:

In order to make Military Mail conform to this scheme, several things were created. These were:

Three Military "States":

AA, which stands for Armed Forces (the) Americas
AE, which stands for Armed Forces Europe
AP, which stands for Armed Forces Pacific

Three "City" equivalents:

APO, which stands for Army Post Office
FPO, which stands for Fleet Post Office
DPO, which stands for Diplomatic Post Office

Based on these constructs, a typical Overseas Military Mail address looks like this:

or

By having all Overseas Military Mail conform to the domestic mailing addressing scheme, the USPS could easily sort and manage it using their sophisticated sorting and distribution machines, just like regular mail.

But there is more to these constructs than addressing schemes. The Military State designators mean more than "phantom" states. They represent the USPS mail processing facilities that handle the mail traffic to and from each Military State. In an analogous form, they represent the neck part of an hourglass. Picture mail flowing into a "neck" location from all parts of the continental United States, then from this "neck" out to all the Military bases and U.S. Embassies in the region of the world represented by the specific Military State.

These "neck" locations, the USPS mail processing facilities themselves, are located in cities that are conducive to getting mail to and from the overseas region of the respective Military State. These Military State/City pairs are:

AA : Miami, FL
AE : New York, NY
AP : San Francisco, CA

Since these cities already had ZIP codes assigned to them, it was decided to have the ZIP codes of the respective Military State be numerically close to the ZIP code of the city where the mail processing facility is located. This allowed the USPS automated sorting equipment to funnel the Military Mail to the proper city where the respective mail processing facility is located.

Once the Military Mail arrives at the respective mail processing facility, it is further sorted by Postal Service Center, APO/FPO/DPO and ZIP code. After that, the USPS "hands it off" to their Military equivalent in a branch of the Armed Forces after transport via contract air carrier and delivery to the overseas APOs, FPOs, and APOs. For APOs and DPOs, either the Army or Air Force provides personnel. For FPOs, the Navy does the job.

At each APO, FPO, or DPO, there is an equivalent to "a-real-honest-to-goodness-Post Office" staffed by members of the respective branch of service. While the layout of each APO/FPO/DPO varies by location, suffice it to say they look and operate just like a "real" Post Office. In fact, they have to, since we are talking about U.S. Mail. Each APO/FPO/DPO address holder has a mail lock box in which their mail is slotted. Since parcels can't fit in these boxes, delivery or notification slips, just like "real" ones, are put in the boxes whenever a parcel arrives.

Outbound mail from APOs/FPOs/DPOs flows in the reverse of the process described above, with the mail passing through the "neck", the mail processing facility for the respective Military State, to enter into the normal USPS sorting and delivery system.

As can been seen, APOs, FPOs, and DPOs are just like the Post Office (P.O.) boxes one can rent at the local Post Office. The only real difference being is that they are located overseas on Military bases or in U.S. Embassies. So simply put, while valid domestic mailing addresses, APO/FPO/DPO addresses are not street or physical addresses; they never were and never will be.

o, with the establishment of the Overseas Military Mail program, three Military States (AA,AE,AP) and three city equivalents (APO, FPO, DPO) were created, along with a specific set of ZIP codes for each Military State. Once these constructs are understood, as well as the flow of packages to and through the mail processing facilities (located in Miami, New York, and San Francisco) which represent the Military States, it is easy to see how confusing all of this can be.