A Firewall is a system between two networks (for example your LAN and the Internet) that manages the network traffic that passes through it. It can be thought of as two mechanisms, one which exists to block traffic, and the other which exists to permit traffic.

Without getting too technical, the Firewall comes in two forms. A network level Firewall, and an application level Firewall or proxy. Most Firewall are network level, meaning that incoming and outgoing network packets are monitored to verify that the source of origin and communication port it is using is within the bounds of what the Firewall has configured.

A proxy works hand in hand with a network level Firewall. It can provide logging and auditing of the type of traffic passing through. It is essentially application specific software that mediates traffic between a protected network and the Internet.

Why a Firewall?

The Internet like any other society is riddled with the kind that enjoy causing grief to others. The Internet can be used as a medium for these people to attack your computer and destroy/alter/exploit any proprietary data that you may have on your system. A Firewall is the only mechanism available that provides any real security.

Generally, firewalls are configured to protect against unauthenticated logins from the 'outside' world. This, more than anything, helps prevent computer hackers from logging into machines on your network.