A network that is set up in a relatively small area, generally, is known as LAN. It can also be defined as a group of computers and associated devices that share a common communications line or wireless link. What happens generally in a LAN Connection is that connected devices share the resources of a single processor or server within a small geographic area (for example, within an office building). Usually, the server has applications and data storage that are shared in common by multiple computer users. A local area network may serve as few as two or three users (for example, in a home network) or as many as thousands of users (for example, in an FDDI network).

What happens in the day to day scenario is that LAN is configured in the same building or same group of buildings, However, one LAN can be connected to other LANs over any distance via telephone lines and radio waves. A system of LANs connected in this way is called a wide-area network (WAN). Most LANs connect workstations and personal computers. Each node (individual computer ) in a LAN has its own CPU with which it executes programs, but it also is able to access data and devices anywhere on the LAN. This means that many users can share expensive devices, such as laser printers, as well as data. Users can also use the LAN to communicate with each other, by sending e-mail or engaging in chat sessions.

There are many different types of LANs, Ethernets being the most common for PCs. Most Apple Macintosh networks are based on Apple's AppleTalk network system, which is built into Macintosh computers.

The following characteristics differentiate one LAN from another:

Topology: The geometric arrangement of devices on the network. For example, devices can be arranged in a ring or in a straight line.

Protocols: The rules and encoding specifications for sending data. The protocols also determine whether the network uses a peer-to-peer or client/server architecture.

Media: Devices can be connected by twisted-pair wire, coaxial cables, or fiber optic cables. Some networks do without connecting media altogether, communicating instead via radio waves.

LANs can transfer data very fast, faster than dial up connections or telephone lines but the disadvantage being the distances are limited. Therefore, LAN is situationally useful, also, there is a limit on the number of computers that can be attached to a single network (LAN)

Major local area network technologies are:

Ethernet
Token Ring
FDDI

Ethernet is by far the most commonly used LAN technology. A number of corporations use the Token Ring technology. FDDI is sometimes used as a backbone LAN interconnecting Ethernet or Token Ring LANs. Another LAN technology, ARCNET, once the most commonly installed LAN technology, is still used in the industrial automation industry.

Typically, a suite of application programs can be kept on the LAN server. Users who need an application frequently can download it once and then run it from their local hard disk. Users can order printing and other services as needed through applications run on the LAN server. A user can share files with others at the LAN server; read and write access is maintained by a LAN administrator. A LAN server may also be used as a Web server if safeguards are taken to secure internal applications and data from outside access.
In some situations, a wireless LAN may be preferable to a wired LAN because it is cheaper to install and maintain.