The kernel starts with three lists of rules; these lists are called firewall chains or just chains. The three chains are called INPUT, OUTPUT and FORWARD.
This is very different from how the 2.0 and 2.2 kernels worked!
For ASCII-art fans, the chains are arranged like so:
_____ / \ -->[Routing ]--->|FORWARD|-------> [Decision] \_____/ ^ | | v ____ ___ / \ / \ |OUTPUT| |INPUT| \____/ \___/ ^ | | ----> Local Process ----
The three circles represent the three chains mentioned above. When a packet reaches a circle in the diagram, that chain is examined to decide the fate of the packet. If the chain says to DROP the packet, it is killed there, but if the chain says to ACCEPT the packet, it continues traversing the diagram.
A chain is a checklist of rules. Each rule says `if the packet header looks like this, then here's what to do with the packet'. If the rule doesn't match the packet, then the next rule in the chain is consulted. Finally, if there are no more rules to consult, then the kernel looks at the chain policy to decide what to do. In a security-conscious system, this policy usually tells the kernel to DROP the packet.