Prajith
Firstly, congratulations on achieving your CCNA.
L3 switches are basically hardware routers in that they have dedicated ASIC's (Application Specific Integrated Circuits) which allow them to route the packets in hardware. This is why L3 switches have far higher forwarding rates than their router counterpart.
It is important to realise that even with L3 switches some functions are still done in software rather than hardware. This varies from switch to switch but in general there are 2 planes
1) data plane - which is concerned with forwarding data and this is done in hardware
2) control plane - which is largely concerned with mainting routing tables, establish peerings with neighbors etc.
A certain amount of the control plane functionality is done in software.
So why would you buy a router over a L3 switch if the L3 switch has much better performance ? Because routers typically support more WAN interfaces and have richer feature sets than L3 switches - QOS is a very good example as is NAT ie. only the 6500 switch supports NAT.
L3 switches generally use what are called SVI's (Switched Virtual Interfaces) to route between vlans. They are virtual because they do not correspond to any physical port on the switch. They are configured as such
int vlan 10
ip address 192.168.5.1 255.255.255.0
this creates a routed interface for any clients in vlan 10. So if you put a PC in vlan 10 it would have an IP address from the 192.168.5.x range and it's default-gateway would be the vlan 10 interface IP of 192.168.5.1.
Cisco switches starting at 3560 and going upwards in numbering are all L3 capable. The 2960 and below are L2 only.
Others may well have other points to add.
Jon
