A Firewall is either software or hardware dedicated to monitor traffic between computers. A hardware firewall is typically a router. This can be programmed to monitor incoming and outgoing traffic. A software firewall will do a similar function, however a hardware firewall can be a lot more programmable and includes many more features for network traffic monitoring. Windows Firewall is a software application integrated into Windows XP SP2 and Vista.
Using Windows Firewall
Third Party Software Firewalls