A firewall is a device that sits on the network between your server and the wider internet. Its purpose is to act as a protective gate - allowing only authorised traffic to flow to and from your server.
The firewall inspects traffic and based on a set of rules decides whether the traffic should be let through, rejected, ignored or logged.
A typical use for a firewall would be to only allow traffic through for specific services - for example web or email services - and reject all others. This would be a basic means of preventing unauthorised access to services such as telnet or ftp which a hacker might exploit. Another possibility is to restrict access to certain services only to users with known IP addresses.
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