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A router is a device used to connect two networks together.  Every device on a network has a network address.  When you get an Internet connection you are assigned a single network address.  If you have more than one device that you want to connect to the Internet then you either need more than one Internet address, which will cost more money, or you can set up a home network with a different address scheme than the Internet uses and connect your network to the Internet with a router.

What a router does is it takes one address on one network and directs the traffic to multiple addresses on another network.  For instance, if you have a computer tower and a laptop both connected to the Internet at the same time and you use the laptop to go to a web page then your laptop sends out a request to the web page for information and the server the web page is on sends the requested information back to the computer.  The problem is the only address the server has to send the information to is the Internet address, which is where the server sends it.  The router then figures out which computer it needs to go to and sends it to the correct one.

Most DSL and cable modems these days have a router built in, but some do not.  If your modem has wireless or more than one Ethernet port in the back then it has a built in router and you do not need to purchase a separate one.  In fact, putting two routers in line with each other can cause connectivity problems if you need to to port forwarding for games or specialty software.  Instead you would use a switch or hub, which, to put it simplistically, is little more than a "splitter" for Ethernet.  It takes one Ethernet port and splits it into many.

The connections for a router can be a little confusing to some people as there are generally five Ethernet ports on the back.  While the power cable, the only other connection back there, is pretty obvious, which port to plug which wires into can be a little confusing.  It's simple if you just remember what a router does.  It takes one address and connects it to many.  If you look at the Ethernet ports back there you will see that there is one port set off by itself and four ports right next to each other.  Just remember that you get one network address from the Internet and you can have as many as you like on your own network and it should be pretty obvious how things hook up back there.  The port by itself is for the Internet, the four ports together are for your home network.

It is important to note that you can only ever have one single router on a given network usually (there are exceptions, but they are not common and must be connected in a precise manner to work).  Remember, a router connects two networks together.  On one side of the router is an existing network (the single port by itself) and on the other side (the 4 ports in a row) is a new network that the router is creating.  If two routers are trying to create new networks over the same connection, such as if both have one of the 4 ports connected to the same switch, then devices attached to that network will be assigned addresses from a random router.  Some will work, others will not, depending on which router assigned the address.