Function
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The terms "encapsulation" and "tunneling" are interchangeable in networking technology. The concept is used either to smuggle packets of one protocol through an incompatible interface while carrying it in a packet designed for another protocol or to protect the packet from tampering. In the later case, the carried packet is entirely encrypted, rendering the routing information in the header unusable, necessitating the services of a carrying packet.
Application
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The most common use of encapsulation is in the creation of Virtual Local Area Networks (VLANs). This configuration gives data carried over shared links, like the Internet, the same level of security offered by private Local Area Networks.
Examples
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Two well known encapsulation protocols are the Generic Routing Encapsulation Protocol (GRE) and the Layer 2 Tunneling Protocol (L2TP). GRE contains its own encryption system; L2TP employs the IPSec (IP Security) protocol to provide encryption.
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