A firewal is a protective system that lies, in essence, between your computer network and the Internet. When used correctly, a firewall prevents unauthorized use and access to your network. The job of a firewall is to carefully analyze data entering and exiting the network based on your configuration. It ignores information that comes from an unsecured, unknown or suspicious location. A firewall plays an important role on any network as it provides a protective barrier against most forms of attack coming from the outside world.
The ideal firewall configuration will consist of both. In addition to limiting access to you computer and network, a firewall is also useful for allowing remote access to a private network through secure authentication certificates and logins.

While many people do not completely understand the importance and necessity of a firewall, or consider it to be a product for businesses only, if your network or computer has access to the outside world via the Internet then you need have a firewall to protect your network, individual computer and data therein.

Hardware Firewalls

Hardware firewalls can be purchased as a stand-alone product but more recently hardware firewalls are typically found in broadband routers, and should be considered an important part of your system and network set-up, especially for anyone on a broadband connection. Hardware firewalls can be effective with little or no configuration, and they can protect every machine on a local network. 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.

A hardware firewall  uses packet filtering to examine the header of a packet to determine its source and destination. This information is compared to a set of predefined or user-created rules that determine whether the packet is to be forwarded or dropped.

As with any electronic equipment, a computer user with general computer knowledge can plug in a firewall, adjust a few settings and have it work. To ensure that your firewall is configured for optimal security and protect however, consumers will no doubt need to learn the specific features of their hardware firewall, how to enable them, and how to test the firewall to ensure its doing a good job of protecting your network.

Not all firewalls are created equal, and to this end it is important to read the manual and documentation that comes with your product. Additionally the manufacturer's Web site will usually provide a knowledgebase or FAQ to help you get started. If the terminology is a bit too tech-oriented, you can also use the Webopedia search to help you get a better understanding of some of the tech and computer terms you will encounter while setting up your hardware firewall.

To test your hardware firewall security, you can purchase third-party test software or search the Internet for a free online-based firewall testing service. Firewall testing is an important part of maintenance to ensure your system is always configured for optimal protection.

Source: http://www.webopedia.com/DidYouKnow/Hardware_Software/2004/firewall_types.asp