Ethernet is a communication protocol that provides rules for signaling and communication between two computers or devices on a local area network (LAN).
Ethernet is officially known as IEEE 802.3 protocol. It was initially developed during the 1970s and has undergone many technical as well as bandwidth changes since then. Nowadays, most computers come equipped with 1GBps or 100 Mbps Ethernet ports.
Although there are other protocols that can be used in LANs, Ethernet has become the standard. Almost every computer today comes with an Ethernet port available.
Ethernet allows both point-to-point communication, in which a computer connects directly to another computer via an Ethernet cable, and multi-point communication, where multiple computers connect to a hub or a switch via cables, so that they can all communicate with each other.
Each computer is assigned an Ethernet address when it is shipped. These addresses are 48 bits in length and are determined by a combination of the geographical area and the manufacturer of the Ethernet card. Ethernet addresses differ from IP addresses in that Ethernet addresses are unique. This means that unless later modified, no two computers in the world will have the same Ethernet address. An Ethernet address consists of a combination of numbers and letters and looks like this: 00-12-2E-61-12-B8.
In the layered model of communication protocols, Ethernet lies just above the physical layer. The Internet protocol (IP) works on top of Ethernet. Ethernet establishes the rules for how the signals should be transmitted and the transmission formats, but it does not provide any information about how to find a computer even if you have its Ethernet address. This is why IP is necessary; IP provides addressing and routing information on top of Ethernet.
- Ethernet and The five-layer TCP/IP model (Wikipedia)