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A firewall is a system designed to prevent unauthorized access to or from a private network. Firewalls can be implemented in both hardware and software, or a combination of both.
How are Firewalls Used?

Firewalls are frequently used to prevent unauthorized Internet users from accessing private networks connected to the Internet, especially intranets. All messages entering or leaving the intranet pass through the firewall, which examines each message and blocks those that do not meet the specified security criteria.
Hardware and Software Firewalls

Firewalls can be either hardware or software but the ideal firewall configuration will consist of both. In addition to limiting access to your computer and network, a firewall is also useful for allowing remote access to a private network through secure authentication certificates and logins.

Hardware firewalls can be purchased as a stand-alone product but are also typically found in broadband routers, and should be considered an important part of your system and network set-up. Most hardware firewalls will have a minimum of four network ports to connect other computers, but for larger networks, business networking firewall solutions are available.

Software firewalls are installed on your computer (like any software) and you can customize it; allowing you some control over its function and protection features. A software firewall will protect your computer from outside attempts to control or gain access your computer.
Common Firewall Techniques

Firewalls are used to protect both home and corporate networks. A typical firewall program or hardware device filters all information coming through the Internet to your network or computer system. There are several types of firewall techniques that will prevent potentially harmful information from getting through:
Packet Filter

Looks at each packet entering or leaving the network and accepts or rejects it based on user-defined rules. Packet filtering is fairly effective and transparent to users, but it is difficult to configure. In addition, it is susceptible to IP spoofing.
Application Gateway

Applies security mechanisms to specific applications, such as FTP and Telnet servers. This is very effective, but can impose a performance degradation.
Circuit-level Gateway

Applies security mechanisms when a TCP or UDP connection is established. Once the connection has been made, packets can flow between the hosts without further checking.
Proxy Server

Intercepts all messages entering and leaving the network. The proxy server effectively hides the true network addresses.

In practice, many firewalls use two or more of these techniques in concert. A firewall is considered a first line of defense in protecting private information. For greater security, data can be encrypted.
Next Generation Firewall (NGFW)

A newer class of firewalls, next generation firewall – NGFW, filters network and Internet traffic based upon the applications or traffic types using specific ports. Next Generation Firewalls (NGFWs) blend the features of a standard firewall with quality of service (QoS) functionalities in order to provide smarter and deeper inspection.