Brian Dennis wrote a long post about the unexpected side effects of the ip default-network command. The Cisco documentation describes the “side effects” but in an even more obscure manner.

What's really happening is this:

• If the parameter of the ip default-network command is a major network, it specifies the default route (how it gets inserted into the routing protocol you're using is a completely different story).
• If the parameter is a subnet of a major network, it specifies the default subnet for the network.

In any case, it's an obscure leftover from the classful days that should probably never be used today outside of a CCIE lab.