Tunneling Explained: How It Works

Published: June 23, 2025

Written by: Lizzie Danielson

Imagine a train traveling through a long, dark tunnel with goods packed tightly in its cars. On the surface, we can't see the train or its contents, but we know it’s headed toward its final destination. This analogy mirrors the concept of network tunneling. Just as the train uses a tunnel to bypass obstacles, network tunneling allows data to travel unobstructed and securely across networks that might not otherwise support it.

In this blog, you will learn exactly what tunneling is, and its various types and protocols, with real-world applications like VPNs. By the end, you'll understand the critical role tunneling plays in modern security. 


What is network tunneling?

Tunneling in networking is a method of sending data from one point to another across a network. It does so by encapsulating the original data packet inside another packet. This process of encapsulation allows the data to pass through networks that might not typically support the original protocol or ensure its security in transit.

For example, tunneling enables data using newer protocols, like IPv6, to traverse networks that only support older ones, such as IPv4. It’s also the backbone of making secure VPN (virtual private network) connections work.


How does encapsulation work?

To better understand tunneling, let's zoom in on the concept of encapsulation. Think of data as a letter you're mailing. The actual letter is the payload or content, and the envelope is the packet's header. Now, imagine putting that envelope into a padded envelope for additional protection—that’s encapsulation. The inner packet with its header and payload becomes the payload of the outer packet.

This process ensures the data reaches its destination securely, regardless of the pathways it takes or potential protocol mismatches.


Why is tunneling important?

Tunneling is essential for overcoming hurdles such as incompatible protocols, and can help enable secure connections between networks. Here are its key uses:

  • Protocol Compatibility: It allows data to traverse networks that don’t naturally support its protocol.

  • Data Security: It can protect sensitive information using encryption.

  • Bypassing Restrictions: It can circumvent network restrictions, such as certain firewalls or geographic content blocks.


Types of network tunneling

Network tunneling isn’t a one-size-fits-all solution. Different tunneling methods and protocols serve specific use cases. Below are the primary types:

1. VPN tunnels

VPN tunneling encrypts internet traffic and routes it securely through a remote server. When you connect to a VPN, your traffic is encapsulated, encrypted, and sent to an endpoint securely. This ensures both privacy and security.

Typical use cases for VPN tunnels include securing connections on public Wi-Fi networks, masking IP addresses, and allowing remote workers to securely access company networks.

2. Split tunneling

Split tunneling gives users control over their traffic by allowing some data to go through the secure VPN tunnel and other data to access the internet directly. For instance:

  • Data tied to work applications can be routed via the VPN.

  • Meanwhile, less sensitive browsing stays routed through the public internet, improving speed.

3. GRE tunneling (Generic Routing Encapsulation)

GRE is one of the most basic tunneling protocols. It allows you to encapsulate one network protocol inside another. For example, GRE might be used to connect two different corporate networks over the Internet. However, it doesn’t encrypt data, so it’s generally paired with additional security.

4. SSH tunneling (Secure Shell)

SSH tunneling creates an encrypted tunnel between two systems. Often, it’s used by network administrators needing a secure connection to remotely access systems or bypass firewalls.

5. IP-in-IP tunneling

This simple protocol encapsulates IP packets within other IP packets. Though it lacks encryption, it’s helpful for setting up simplified routing between different network segments.


Common tunneling protocols

Several tunneling protocols facilitate these types of tunneling. Each has unique features tailored to specific network scenarios:

1. IPsec (Internet Protocol Security)

IPsec creates encrypted connections at the network layer. It’s a popular choice for secure VPN tunnels, ensuring data is encrypted from endpoint to destination.

2. L2TP (Layer 2 Tunneling Protocol)

When paired with IPsec for encryption, L2TP is a VPN tunneling protocol (L2TP/IPsec) designed to transport data securely at the data link layer (layer 2) of the OSI model.

3. PPTP (Point-to-Point Tunneling Protocol)

One of the oldest tunneling protocols, PPTP is fast due to lighter encryption. However, its lack of robust security makes it less favorable in modern applications.

4. SSTP (Secure Socket Tunneling Protocol)

SSTP encrypts data using SSL/TLS and operates at layer 4 of the OSI model. It’s often used in environments where firewall restrictions block other tunneling protocols.

5. VXLAN (Virtual Extensible LAN)

Often used in cloud and data center operations, VXLAN enables the creation of a virtual network for scalable infrastructure.


Finding the right tunnel for your cyber strategy

Network tunneling has profound applications across industries and everyday use cases. Here’s a look at a few real-world scenarios:

  • Remote Work Security via VPNs

Tunneling ensures remote employees can securely access confidential company files and tools without exposing them to risks over public networks. 

  • Bypassing Internet Censorship

Tunneling allows users to circumvent country-specific internet restrictions. For example, VPN users in certain regions may use tunnels to access blocked websites.

  • Cloud and Data Center Connectivity

Tunneling protocols like VXLAN provide a scalable, secure network infrastructure for connecting virtual machines in a data center or across clouds.

  • Gaming and Possible Reduction in Throttling

Some internet service providers (ISPs) throttle your connection when they detect high bandwidth usage, like gaming or streaming. A VPN can mask your activity, reducing the chance your ISP slows your connection.


Tunnel tested, hacker approved (not really—that’s the goal!)

From enabling secure remote work to improving multi-cloud connectivity, tunneling is a crucial aspect of modern networking. It bridges gaps between networks, secures data, and keeps businesses running smoothly. Whether you're dealing with firewalls, compatibility issues, or security concerns, understanding how tunneling works offers you a powerful tool in navigating the internet’s complexities.