About an hour ago something weird happened that I have never seen before.
Zone Alarm detected a new private network, IP=169.254.0.0./255.255.0.0
I didn't know what to do. My normal network is Verizon DSL 198.168 etc.
Alert asked if to place it in trusted or internet zone. I did not want to place it anywhere. There was no help. ZA replaced my Verizon network line with this new thing. I could not do much really until I responded to the alert. There was no option to leave things alone.

I tried Google to see what it's all about, but could not connect to the internet. The little connectivity icon at the bottom of the screen said something about limited connection. True.

I shut down the computer. But it came back with the same thing. At that point I told ZA to shut off all internet access.
I shut down computer again, then router, then the modem.
I turned things back on in reverse sequence, and now everything is OK, Verizon is back, and, as you can see, I can get to the internet.

I haven't yet ran Ad-aware, Spybot SandD, PestPatrol to see what damage occured while I was scratching my head.

What does one do in a situation such as this when there is no option to do nothing?

This is the ip address that Microsft Windows assigns to your network interfaces when it cant get an IP address through DHCP. This is probably nothing to worry about.

What probably happened was verizon was having a problem at the time and you did not receive an ip address from them, so microsoft assigned you one in the 169 range. Zone alarm saw this as a new network. Then when verizon came live again and you were issued a new ip address, it went back to normal

Thank you, exhausted Grinler.
It sounds very reasonable what you wrote.
Can I conclude from this that when Zone Alarm sees a new network to NEVER worry or still be careful? and if so, how other than buggin you?
Is that 169... number a tipoff that it is Verizon?

If its a range in 192.168, 10.0 or 10.10 its usually ok. 169 is not verizon but a network microsoft uses when it cant get a ip address from elsewhere

Automatic Private IP Addressing (APIPA) feature of Windows XP Professional. This assignment means that TCP/IP is configured for automatic configuration, that no DHCP server was found, and that no alternative configuration is specified. Like Grinler said your ISP was probably down at the instant your computer wanted an IP address. ZoneAlarm said "new network" and wanted to add it. Even if you had added it as a "trusted" network it would be safe because 169 IP's are not routable from the internet.

Here's the technical explanation for your brain:

Thank you both for going to the trouble to explain so well. Somehow I missed the connection with the tutorial materials and will reread again.