The first three pairs of digits in the MAC address are called the OUI (Organizational Unique Identifier), which identifies the company that manufactured or sold the device. For example, a MAC address that begins with 00:1F:33 denotes a Netgear product. The last three pairs of digits are specific to the device and can be more or less considered a serial number of sorts. Together, the two parts of the MAC address form an ID that's unique to a particular device.
To understand how MAC addresses are used, first consider that when you type www.abc.com into your Web browser, it can't get there until a DNS (Domain Name Service) server looks up the corresponding IP address for the Web site allowing a connection to take place. While MAC addresses don't have any real significance on the Internet, they're used in a similar way on a LAN (local area network).
Given that IP addresses can't be permanently assigned to a device — after all, a particular address can belong to one computer today and another one tomorrow — MAC addresses allow communication between devices on a local network by making it possible to reliably distinguish one computer from another. Just as DNS matches a Web site name to an IP address on the Internet, a technology called ARP (Address Resolution Protocol) matches an IP address to the corresponding MAC address of a specific device to which that IP address is currently assigned.
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