Let's begin this post by telling you what a router is: a router is a networking component that controls Internet and LAN traffic, splits the available bandwidth between multiple PCs, filters the packets, acts as a hardware firewall based on its configuration, network gateway to Internet, NAT and DHCP server and wireless Access Point (in case we're referring to wireless routers). A wireless router is essentially a number of network cards (one for each port) connected internally by an intelligent switch that directs the incoming/outgoing packages.
A hardware router functions by comparing IP addresses with rules in its configuration and (re)directs traffic packages to a destination IP address (IP addresses are always written in packets). All Internet connections our computer initiates between two points are travelling through multiple routers on their way to reach final point, and all routers are filtering the packages according to established rules (not necessary the same rules) and then pointing packet in the right direction. If a package does not meet a criteria it can be deleted, therefore never reaching its destination.
Source : goarticle by John Pope
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