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If you are reading this page I assume you are preparing to some kind of exam of certification. Otherwise you are better off browsing other pages on the same site. All the information contained below has zero or negative practical importance and you should probably save your time or spend it studying TCP Protocol Layer model instead.

International Organization for Standardization (ISO) developed this  model called the Open Systems Interconnection (OSI)  in  1984.  Like many other ISO documents. it proved to be of little practical use and after relegated to the dustbin of history its main purpose is to do some harm to the community (and especially to students ;-). In a way it was still born,  very similar to ISO certifications, although it definitely caused much less damage ;-). Despite this fact it is widely used at various stupid and no so stupid certifications.

I would like to stress it again: this model is mostly used to torture students forcing them to remember a by-and-large useless abstraction of multi-layer protocol stack, and to compare it to other (more practical like 5 layers TCP/IP model) protocol stacks. Even as an abstraction it is questionable.  

OSI model, contains seven layers which build on one another. Each layer provides specific services and makes the results available to the next layer. Theoretically each layer should be independent of all others, but this is a simplistic notion (and one of the reasons of OSI model demise). 

The OSI model does not corresponds to TCP/IP model and has more layers (seven) that are more a conceptual exercise created by a large committee (each layer is reasonably self-contained) then of practical importance.  The following list details the seven layers of the Open System Interconnection (OSI) reference model:

Control is passed from one layer to the next, starting at the application layer in one station, proceeding to the bottom layer, over the channel to the next station and back up the hierarchy.
 
Application
(Layer 7)
This layer supports application and end-user processes. Communication partners are identified, quality of service is identified, user authentication and privacy are considered, and any constraints on data syntax are identified. Everything at this layer is application-specific. This layer provides application services for file transfers, e-mail, and other network software services. Telnet and FTP are applications that exist entirely in the application level. Tiered application architectures are part of this layer.
Presentation
(Layer 6)
This layer provides independence from differences in data representation (e.g., encryption) by translating from application to network format, and vice versa. The presentation layer works to transform data into the form that the application layer can accept. This layer formats and encrypts data to be sent across a network, providing freedom from compatibility problems. It is sometimes called the syntax layer.
Session
(Layer 5)
This layer establishes, manages and terminates connections between applications. The session layer sets up, coordinates, and terminates conversations, exchanges, and dialogues between the applications at each end. It deals with session and connection coordination.
Transport
(Layer 4)
This layer provides transparent transfer of data between end systems, or hosts, and is responsible for end-to-end error recovery and flow control. It ensures complete data transfer.
Network
(Layer 3)
This layer provides switching and routing technologies, creating logical paths, known as virtual circuits, for transmitting data from node to node. Routing and forwarding are functions of this layer, as well as addressing, internetworking, error handling, congestion control and packet sequencing.
Data Link
(Layer 2)
At this layer, data packets are encoded and decoded into bits. It furnishes transmission protocol knowledge and management and handles errors in the physical layer, flow control and frame synchronization. The data link layer is divided into two sublayers: The Media Access Control (MAC) layer and the Logical Link Control (LLC) layer. The MAC sublayer controls how a computer on the network gains access to the data and permission to transmit it. The LLC layer controls frame synchronization, flow control and error checking.
Physical
(Layer 1)
This layer conveys the bit stream - electrical impulse, light or radio signal -- through the network at the electrical and mechanical level. It provides the hardware means of sending and receiving data on a carrier, including defining cables, cards and physical aspects. Fast Ethernet, RS232, and ATM are protocols with physical layer components.

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Protocol Stacks in Relationship to the OSI Model

7) Application : Provides different services to the applications

6) Presentation : Converts the information

5) Session : Handles problems which are not communication issues

4) Transport : Provides end to end communication control

3) Network : Routes the information in the network

2) Data Link : Network Interface Cards: Ethernet, Token-Ring, ARCNET, StarLAN, LocalTalk, FDDI, ATM, etc.
NIC Drivers: Open Datalink Interface (ODI), Network Independent Interface Specification (NDIS)

The main task of the data link layer is to take a raw transmission facility and transform it into a line that appears free of transmission errors in the network layer. It accomplishes this task by having the sender break the input data up into data frames (typically a few hundred bytes), transmit the frames sequentially, and process the acknowledgment frames sent back by the receiver. Since the physical layer merely accepts and transmits a stream of bits without any regard to meaning of structure, it is up to the data link layer to create and recognize frame boundaries. This can be accomplished by attaching special bit patterns to the beginning and end of the frame. If there is a chance that these bit patterns might occur in the data, special care must be taken to avoid confusion.

The data link layer should provide error control between adjacent nodes.

Another issue that arises in the data link layer (and most of the higher layers as well) is how to keep a fast transmitter from drowning a slow receiver in data. Some traffic regulation mechanism must be employed in order to let the transmitter know how much buffer space the receiver has at the moment. Frequently, flow regulation and error handling are integrated, for convenience.

If the line can be used to transmit data in both directions, this introduces a new complication that the data link layer software must deal with. The problem is that the acknowledgment frames for A to B traffic compete for the use of the line with data frames for the B to A traffic. A clever solution ( piggybacking ) has been devised.

Example : HDLC

1) Physical : The first layer of the OSI model is primarily concerned with media, the actual physical wiring that connects a network; and with the standards for a particular media. For example, each of the pins in the 25-pin serial connector known as DB25 has a specific job. Transmission media (Transmission Media: Twisted Pair, Coax, Fiber Optic, Wireless Media, etc.)  The physical later is concerned with transmitting raw bits over the media. The design issues have to do with making sure that when one side sends a 1 bit, it is received by the other side as a 1 bit, not as a 0 bit. Typical questions here are how many volts should be used to represent a 1 and how many for a 0, how many microseconds a bit lasts, whether transmission may proceed simultaneously in both directions, how the initial connection is established and how it is torn down when both sides are finished, and how many pins the network connector has and what each pin is used for. The design issues here deal largely with mechanical, electrical, and procedural interfaces, and the physical transmission medium, which lies below the physical layer. Physical layer design can properly be considered to be within the domain of the electrical engineer.

Example : The X.21 digital interface.

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