A Network address translation is the task of assigning a public IP address to either a single computer or a group of computers that are networked together. That process is usually handled by a connection device such as a firewall. Since most networks are private, a connection device can be thought of as the piece of hardware that serves as a connection point to the Internet.
Why are NATs used?
The primary reason that Network Address Translations are used is to save money. The longer answer to that question is that because networks share resources, a NAT allows a network to use fewer public IP Addresses. This, in turn, saves the network operator the cost of buying more IP Addresses than what is needed by the network.
Each unit, computer, printer, scanner that make up a network needs to have an IP Address, but not every unit that makes up a network needs to have access to the Internet. To help solve this problem, network administrators use something called a private IP Address. A private IP Address is one that is used within a private network. It is made up of a special range of numbers that marks it as private. The range of numbers that is allotted for private IP Addresses are recognized by connection devices such as routers and firewalls. A private IP Address is never allowed onto the Internet. Imagine the cost of connecting an entire high-rise building to the Internet. The business would be spending hundreds if not thousands of dollars each month just in IP Address related charges. This is why there is a difference between private and public IP Addresses.
Sadly, it is never quite this cut-and-dry. The NAT function occurs when a computer or device inside of the networks makes a request or receives a request that requires it to look outside of the network. When these types of requests are made the components that connect to the Internet recognize the request as needing to be achieved by going outside of the network. When this happens those requests are sent to the firewall which notes the private IP Address, and then relays the request using the public IP Address that is assigned to the firewall. When the request is returned to the firewall, it attaches it to the private IP Address that asked for the request and sends the information back to that computer.
Remember that an IP Address is simply an identification tag that is used to distinguish one computer or device from another. The process of utilizing a NAT is usually not even noticed by the computer user.