A Local Area Network, as the name suggests, connects machines in close geographical proximity, although exactly what "proximity" means can be stretched. The term "Wide Area Network" (WAN) is used for networks that expand beyond the office. The Internet is the best known example of a WAN. The Internet is also an "internet", a collection of networks acting as one.

Usually a WAN will have one or more slow links, perhaps over telephone lines between cities, whereas all the links in a LAN will be fast. This difference in speed is important for optimising the overall network performance.

The usual use of the of term "LAN," however, implies more services than simply making connections between local machines. On a LAN, we expect to share files, programs, or printers, all without being particularly aware of where the physical resources we're using are actually located. LANs providing these types of services are typically set up either as 'peer-to-peer" or "client-server" LANs, or perhaps as a combination of the two.

All the machines on a peer-to-peer LAN are equal. Provided that the file's owners give permission, a file on machine A can be accessed from machine B, and vice versa. Peer-to-peer LANs do not require any one machine to be a dedicated, high-performance server; service by a peer-to- peer LAN is often cheaper for this reason. Peer-to-peer LANs work well when only a small number of machines are connected to it. As the size of the LAN grows, peer-to-peer services can become quite disorganised, and because each machine on the LAN must be powerful enough to serve all of its peers, the cost increases. For larger LANs, the dedicated client-server LAN architecture becomes more cost effective.

A client-server LAN consists of one or more server machines on which shared files and programs reside and many client machines where people do their work. The LAN server machines are usually big and fast because they must serve many users, while the client machines need only be fast enough for one person to use at a time. Shared printers are either attached directly to a server, or to a print server (a specialised computer attached to the network), or to a personal computer on network that acts as a print server.