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A multilayer switch is a network device that has the ability to operate at higher layers of the OSI reference model, unlike the Data Link Layer (DLL) traditionally used by switches. A multilayer switch can perform the functions of a switch as well as that of a router at incredibly fast speeds. A switch traditionally inspects frames, while a multilayer switch inspects deeper into the protocol description unit (at packet or even at segment level). Multilayer switches use ASIC hardware circuits to perform routing functions. This differs from typical routers, which reside on a microprocessor and use applications running on it to perform their routing operations.
Traditionally, switches are the network devices that forward data packets based on the Layer 2 information like media access control (MAC) addresses. Routers forward packets based on IP addresses. The router strips off the old Layer 2 header, slaps on the new one and queues the packet for transmission.
As multilayer switching technology developed, higher level functions were also added such as the ability to look deep inside packets for information that could aid in the packet-forwarding process. Thus, multilayer switches became devices that examine Layer 2 through Layer 7.