If your SLIP server allocates an IP address dynamically, then you certainly don't know your address in advance---therefore, you can't include an entry for it in /etc/hosts. (You should, however, include an entry for your host with the loopback address, 127.0.0.1.)
Many SLIP servers print your IP address (as well as the server's address) when you connect. For example, one type of SLIP server prints a string such as,
Your IP address is 188.8.131.52.
Server address is 184.108.40.206.
dip can capture these numbers from the output of the server and use them to configure the SLIP device.
See Section 220.127.116.11, above, for information on configuring your various TCP/IP files for use with SLIP. Below, we explain how to configure dip to connect to the SLIP server.