Layer 2 Switches (The Data-Link Layer)
\r\nLayer 2 switches operate using physical network addresses. Physical addresses, also known as link-layer, hardware, or MAC-layer addresses, identify individual devices. Most hardware devices are permanently assigned this number during the manufacturing process.
\r\nSwitches operating at Layer 2 are very fast because they only sort physical addresses, and don¿t look at the data packet very closely to learn anything more about where they are sent.\r\n
\r\nLayer 3 Switches (The Network Layer)
\r\nLayer 3 switches use network or IP addresses that identify locations on the network. They read network addresses more closely than Layer 2 switches, identifying network locations as well as the physical device. A location can be a LAN workstation, a location in a computer's memory, or even a different packet of data traveling through a network. \r\n
\r\nSwitches operating at Layer 3 are smarter than Layer 2 devices and incorporate routing functions to actively calculate the best way to send a packet to its destination. Although they are considered "smarter", they may not be as fast if their algorithms, fabric, and processor do not support high speeds.