Black Box Explains...Layer 3 switching..
In the last decade, network topologies have typically featured routers along with hubs or switches. The hub or switch acts as a central wiring point for LAN segments while the router takes care of higher-level functions such as protocol translation, traffic between LAN segments, and wide-area access.
Layer 3 switching, which combines Layer 2 switching and Layer 3 IP routing, provides a more cost-effective way of setting up LANs by incorporating switching and routing into one device. While a traditional Layer 2 switch simply sends data along without examining it, a Layer 3 switch incorporates some features of a router in that it examines data packets before sending them on their way. The integration of switching and routing in a Layer 3 switch takes advantage of the speed of a switch and the intelligence of a router in one economical package.
There are two basic types of Layer 3 switching: packet-by-packet Layer 3 (PPL3) and cut-through Layer 3.
PPL3 switches are technically routers in that they examine all packets before forwarding them to their destinations. They achieve top speed by running protocols such as OSPF (Open Shortest Path First) and by using cache routing tables. Because these switches understand and take advantage of network topology, they can blow the doors off traditional routers with speeds of more than 7,000,000 (thats seven million!) packets per second.
Cut-through Layer 3 switching relies on a shortcut for top speed. Cut-through Layer 3 switches, rather than examining every packet, examine only the first in a series to determine its destination. Once the destination is known, the data flow is switched at Layer 2 to achieve high speeds.