How Firewalls Work

They help to protect against viruses, malicious software and hackers. At the same time, they can allow communication with other computers or Internet sites that are known to be safe. There are two types of firewalls: Hardware-based and software-based.
Hardware Firewall
A hardware firewall can be a stand-alone product, or it may be part of a broadband router. A firewall in a broadband router generally needs no configuration by the user, and it protects all computers on a local network. Hardware firewalls work by using a technique called packet filtering to intercept information before it enters the private network. Any data coming from unknown, unsecured or suspicious locations is rejected and not allowed through. 
Software Firewall
A software firewall is a program that must be installed on a computer. It can be customized by the user. The program runs in the background and protects the computer from suspicious data. It can be configured to always allow information from certain sites or to always block certain sites. It can also be temporarily turned off if it is interfering with attempts to access websites or other computers that are known to be safe. 
Which is better?
Hardware and software firewalls each have advantages and disadvantages. A hardware firewall will protect all computers on a network, but software firewalls must be installed on each computer. This does allow each computer user to choose and customize their firewall software. Since hardware firewalls protect all computers on a private network, individual customization per computer is not possible. Software firewalls must be updated regularly by downloading recommended updates from the manufacture. A software firewall is particularly important for laptop or notebook computers that are taken from place to place. Some functions of hardware and software firewalls overlap, but in general it is best to have both types.
What Firewalls Don’t Do
A Firewall operates by barring unsecured data from reaching a computer or the computers on a network. It determines what is unsecured or potentially unsecured by following a set of rules that are programmed into it. While a firewall may prevent computer viruses by blocking them, viruses, malware, and other types of malicious data can still get past a firewall if it does not recognize them as a threat. Therefore, it is important to have anti-virus and anti-malware software installed in addition to a firewall.