How do Firewalls Work? 

How do Firewalls Work?

A network Firewall is some dedicated hardware or software that tries to prevent unauthorized access of outside network traffic to individual computers (personal firewall) or to a group of computers. Some firewalls also block the outflow of data 'packets' from unauthorized programs in the protected computer.
Firewalls typically adopt one or more of the following methods to secure traffic flowing in and out of a computer/group of computers,
Network Address Translation (NAT) - works from within a network router to translate the service provider's assigned IP address to multiple addresses within the internal network. This hides the IP address of each individual computer in the network from scanners software in the internet.
Packet Filtering - inspects each packet of network data going in and out of the firewall (packet filtering is usually hardware implemented) and accepts or reject packets based on a configured set of access policy. Most network routers implement some sort of packet filtering, it???s cheap and fast but difficult to configure for heightened levels of security. This is because packet filters looks at source & destination IP addresses, ports and protocols but not at content or purpose of the packets (e.g. it does not does not know that the packet is an outgoing Outlook email).
Stateful Packet Inspection (SPI) - instead of inspecting each data packet independently, SPI filtering looks at certain characteristics of flow of data packets and compares against its sets of configured rules. This allows more intelligent decision but usually requires user intervention from within the firewall software.
Application Level Proxy Server - a software solution where an intermediary application secures the data traffic going in and out of a system from a particular application. When an application needs to send data to the internet, the proxy servers performs the connection and pass/fails the transaction based on earlier user configuration. As the process is done on a proxy server (internal or external), network performance always degraded.