Firewall protects your computer from intrusion by filtering incoming and outgoing traffic. It can be implemented as software or hardware. A hardware firewall is usually a box sitting next to your physical network connection (like DSL or cable modem) and local network computers are connected to it directly or though router or switch.
Internet Connection Firewall (ICF) that is built into Windows is software firewall. This means that it is a software application that runs on your computer and filters network traffic. First you need to enable it and set it up.