FIREWALL:
A wall constructed to prevent the spread of fire.
It is hardware / software or combination of both which is used to prevent unauthorized or unwanted communication between trusted and un-trusted networks. It allows the traffic based on rules, IP address, ports, etc.

Firewalls are frequently used to protect the private network (Intranet), from accessing by unauthorized internet users i.e, private networks which are connected to internet can be accessible by any unauthorized users, but if a firewall is used it inspects each message and blocks if that does not meet the Security rule.

Usually data is transferred in the form of “packets” from one system to other in a network, Firewall inspects each individual packet from either side and determines whether to allow or block the packet. In some cases it even asks the user about allowing the packet.

A Packet consists two types of data 1.Control information 2. User data. The first provides data the networks need to deliver the user data i.e source and destination address, sequencing etc.

Basically there are three categories they are

Hardware firewall:

1. Hardware firewalls are important because they provide a strong degree of Protection from most forms of attack coming from the outside world.

2.They can be effective with little or no configuration, and they can protect entire network i.e every machine on a local network.

3.More expensive and harder to configure.

4.This follows a technique called “packet filtering”
(Packet filtering: Packet filtering is the blocking of data packets as they pass through a network interface when the packet does not meet security criteria.)

1.Hardware firewall examines the header of the packet for its source and destination address which are compared to predefined rules which are described by the user and then determines whether to allow or block the packet.

2.The more advanced technique is Statefull packet interface which looks at packet actual origin i.e did it come from internet or from local network.

3.Because it's not physically on your machine, a hardware firewall is less vulnerable than a software firewall.

Software firewall:

Software firewall when installed on a computer, you can specify which applications are allowed to communicate over the Internet. Programs that aren't explicitly allowed to do so are either blocked or else the user is prompted for confirmation.

Most of the software firewalls have user defined controls which are used to design their own security laws. A software firewall will protect your computer from outside attempts to control or gain access your computer.

A good software firewall is, which runs in the back ground of your machine and uses only a small amount of system resources.

Best thing is to use a combination of hardware and software firewall.
Actually a Software firewall in installed on one machine and it acts as proxy to other computers.

Firewall Technique:

Packet filter: It is blocking of data packets as they pass through a network interface when the packet does not meet security criteria.

Packet filter probes each packets passing through network based on the user defined rules.