The Intel 8086 is a 16-bit microprocessor, which means its internal registers and data bus are 16 bits wide.
However, to allow it to access a larger memory space, it was designed with a 20-bit address bus.
The number of unique memory locations a microprocessor can access is determined by the number of its address lines, 'n'. The total addressable memory is $2^n$.
With 20 address lines, the 8086 can address $2^{20}$ memory locations.
$2^{20} = (2^{10})^2 = (1024)^2 \approx (10^3)^2 = 10^6$, which is 1 Megabyte (MB).
Therefore, the 8086 microprocessor has 20 address lines.