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The 7 Layers
To perform network basics (port forwarding, NAT, packet filtering firewalls, etc) it is important to have a good understanding of the first 3 network layers. As a network administrator, it is these layers that the equipment you deal with operates. 1. 2. 3. 4. 5. 6. 7. Physical Link (Data Link) Network Transport Session Presentation Application
Since the main purpose of a MAC address is to provide a unique identifier for each host this does not provide any means for routing or organizing the hosts that participate on a network. If we only had MAC addresses and no IP addresses all routers and switches would have to memorize ALL addresses available and the routes needed to get to the destination. This would make the Internet extremely SLOW and all network devices unbearably expensive because of the massive amounts of memory needed in creating routing tables. Not to mention when you would add a new PC to the internet, it would take a considerable amount of time for your MAC address and the path to your PC to propagate throughout the Internet. This means that there is a need for another layer of addressing to group machines together. The third layer is the Network Layer.
Network Layer
The network layer is responsible for logical addressing. It allows for grouping computers together unlike the MAC address where there may be no similarity from one MAC address to another. Clue: Think of a MAC address like a person's diver's license number, it is just a number that is unique from anyone else's. Now think of an IP address like a person's mailing address. The mailing address group people into zones by using the zip code, city, state, and street identifiers. Now let's see how these layers work together:
Layers 1 - 3 Summary
When a network card receives a stream of bits over the network, it receives the data from the wires (the first layer), then the second layer is responsible for making sense of these random 1s and 0s. The second layer first checks the destination MAC address in the packet to make sure the data was intended for this computer. If the destination MAC address matches the MAC address of the network card, the packet is then sent to the computer's operating system, the rest of the layers (3 - 7).