Meaning – The term IP tunnel, refers to a mechanism for dataencapsulation across an IP network. An IP tunnel is usually employed for connecting two disjoint IP networks that don’t have a native routingpath to each other, via an underlying routable protocol across an intermediate transport network.
In conjunction with the IPsec protocol, they may be used to create a virtual private network between two or more private networks across a public network such as the Internet. Another prominent use is to connect islands of IPv6 installations across the IPv4 Internet.
In IP tunneling, every IP packet, including addressing information of its source and destination IP networks, is encapsulated within another packet format native to the transit network.
Example of usage – “IP tunneling often bypasses simple firewall rules transparently since the specific nature and addressing of the original datagrams are hidden.”