Instance Level IP addresses (ILPIP) are distinct from other types of IP addresses in Azure and have a very specific purpose and benefit. They are limited to 5 per Azure Subscription and intended to permit applications such as passive FTP to function, which requires a lot of open ports. They bypass the load balancer and firewall, allowing direct access to the VM. They do not take the place of the VIP assigned to the load balancer, but they can only be added alongside a VIP. At this time, an ILPIP cannot be added to VM’s that have multiple NICs (yet?).

Instance Level IP’s cannot be reserved and therefore are lost when the VM is shut down. They can dynamically register to a hostname that can be used in a CNAME record, so that if the IP changes, you are still fine as long as you point things to the CNAME record and not the IP address.  Another benefit is that the source IP address comes from the VM rather than from the IP of the load balancer.

Something to be aware of is that ILPIP’s do not use the Endpoints feature in Azure, and therefore all internet ports are open – requiring the use of a host-based firewall to be running on the VM to filter traffic.

You can assign ILPIP to an existing or new VM by piping set-AzurePublicIP as follows:

Get-AzureVM -ServiceName ftp01 -Name ftp01 | Set-AzurePublicIP -PublicIPName ftp01pip01 -IdleTimeoutInMinutes 4 -DomainNameLabel ftp01pip01 | Update-AzureVM

Then the CNAME record would point to the PublicIPFQDNs that is revealed when you run a get-AzureVM command. For example: ftppip01.ftp01.cloudapp.net

To request an ILPIP during VM creation you would use this command:

New-AzureService -ServiceName FTPService -Location "Central US"
$image = Get-AzureVMImage|?{$_.ImageName -like "*RightImage-Windows-2012R2-x64*"}
New-AzureVMConfig -Name FTPInstance -InstanceSize Small -ImageName $image.ImageName `
| Add-AzureProvisioningConfig -Windows -AdminUsername adminuser -Password MyP@ssw0rd!! `
| Set-AzurePublicIP -PublicIPName ftpip | New-AzureVM -ServiceName FTPService -Location "Central US"

References:

https://azure.microsoft.com/en-us/documentation/articles/virtual-networks-instance-level-public-ip/

http://blog.siliconvalve.com/2015/06/29/setting-instance-level-public-ips-on-azure-vms/