A network switch operates at layer 2, the data link layer of the OSI model. It records the MAC (Media Access Control) addresses of the devices attached to its ports. When a frame is received intended for a device connected to one of its ports, it sends that frame only to that device, thereby reducing network traffic.
A multilayer switch also works at layer 3, the network layer of the OSI model. That's why a multilayer switch is sometimes called a layer 3 switch.
At layer 3, data is encapsulated into packets containing the destination IP address. This allows the switch to also perform routing between subnets, which further optimizes network traffic.
The term multilayer means the switch operates at multiple layers of the OSI Model. Today there are multilayer switches that use information in layer 4 segments and protocol data units all the way up to layer 6 of the OSI model.
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