A firewall cannot really protect you against threats inside your network. It cannot prevent individual users with modems from dialling into or out of the network, bypassing the firewall altogether. Employee misconduct or carelessness cannot be controlled by firewalls. A firewall cannot protect against hacking from within. A firewall is just another layer of security for things like:

Viruses that spread through e-mail, such as Trojan horses, which masquerade as helpful or benign software and trick you into opening or downloading them.
Trojan horses; similar to the virus threat, it is easy to trick a user into downloading a program or opening an email attachment that can allow malicious code onto the local system....

Firewall monitors all network traffic on the connections for which it is enabled. The firewall keeps track of all communications that have originated from your computer, and it prevents unsolicited traffic from reaching your computer.

If necessary, the firewall dynamically opens ports and allows your computer to receive traffic that you have specifically requested, such as a Web page for which you have clicked the address.
A “port” is a networking term that identifies the point at which a type of network traffic reaches your computer. The exact ports that you open depend on the type of traffic you want to send and receive.
If you have not requested the incoming traffic. Firewall helps block it before it can reach your computer. For special uses, such as networking, hosting online games, or hosting your own Web server, you can select ports that you want to leave open. This allows others to make connections to your computer, but it can also reduce security....

There are many creative ways that unscrupulous people use to access or abuse unprotected computers:

Remote login – When someone is able to connect to your computer and control it in some form. This can range from being able to view or access your files to actually running programs on your computer....

A firewall is simply a program or hardware device that filters the information coming through the Internet connection into your private network or computer system. A firewall trusts nobody unless it is told otherwise. It secures your computer from the outside world. It helps protect computers inside a large company.

A company can set up rules like this for FTP servers, Web servers, Telnet servers and so on. In addition, the company can control how employees connect to Web sites, whether files are allowed to leave the company over the network and so on. A firewall gives a company tremendous control over how people use the network....

There are two general categories: hardware and software. Firewalls can be implemented in both hardware and software, or a combination of both.

Hardware Firewall ...

If you have been using the Internet for any length of time, and especially if you work at a larger company and browse the Web while you are at work, you have probably heard the term firewall used. Basically, a firewall is a barrier unauthorized Internet users from accessing private networks connected to the Internet, especially intranets.

The term “fire wall” originally means a fireproof wall intended to prevent the spread of fire from one room or area of a building to another. A firewall's purpose is very simple: to block or filter people from accessing your computer remotely or viruses and worms infecting your machine. It basic task is to regulate some of the flow of traffic between computer networks of different trust levels. Some firewalls will also monitor outgoing traffic for suspicious behavior. One characteristic of many viruses is that once you’re infected they attempt to establish connections to other computer to spread....