A hot subject in the security world is encryption. Encryption is used to stop packet-sniffing (also known as packet capturing or protocol analyzing) attacks. Sniffing happens when an unauthorized third party captures network packets destined for computers other than their own. Packet sniffing allows the attacker to look at transmitted content and may reveal passwords and confidential data.
In order to use sniffing software, an attacker must have a promiscuous network card and specialized packet driver software, must be connected to the network segment they want to sniff, and must use sniffer software. By default, a network interface card (NIC) in a computer will usually drop any traffic not destined for it. By putting the NIC in promiscuous mode, it will read any packet going by it on the network wire. Note that in order for a sniffer to capture traffic, it must physically be able to capture it. On switched networks, where each network drop is its own collision domain, packet sniffing by intruders can be more difficult, but not impossible.
Packet-sniffing attacks are more common in areas where many computer hosts share the same collision domain (such as a wireless segment or local LAN shared over an Ethernet hub) or over the Internet where the attacker might insert a sniffer in between source and destination traffic. For example, on a LAN, a less privileged user may sniff traffic originating from an administrative account, hoping to get the password.