How does a 'router' work?

Routers work much like bridges, but they listen to the upper network layer protocols (OSI layer 3) rather than physical layer (OSI layer 1) protocols. A router will decide whether to forward a packet by looking at the protocol level addresses (for instance, TCP/IP addresses) rather than the MAC address. Because routers work at layer 3 of the OSI stack, it is possible for them to transfer packets between different media types (i.e., leased lines, Ethernet, token ring, X.25, Frame Relay and FDDI). Many routers can also function as bridges.