NAT concepts and address terminology
NAT works by maintaining a translation table on a router or firewall. When a private-address device sends a packet to the internet, NAT replaces the private source IP with a public IP before forwarding the packet. When the response comes back, NAT replaces the public destination IP with the original private IP and delivers it to the correct internal device.
NAT uses four address terms that the exam tests precisely. Inside local: the private IP address of an internal device as seen from inside the network (e.g., 192.168.1.10). Inside global: the public IP address that represents that internal device to the outside world. Outside global: the actual public IP of the remote server on the internet. Outside local: how the remote server's IP appears to the inside network, which in most configurations is the same as the outside global.
The terms inside and outside refer to the network perspective. Inside = your organization's network. Outside = the internet or any external network.
Static NAT, dynamic NAT, and PAT
Static NAT creates a permanent one-to-one mapping between one private IP and one public IP. Every packet from 192.168.1.10 always appears as the same public IP on the internet. Inbound connections work too because the mapping is permanent. Static NAT is used for servers that need to be reachable from the internet: web servers, mail servers, and VPN endpoints.
Dynamic NAT maps private IPs to public IPs from a pool on demand. When a device initiates an outbound connection, NAT assigns the next available public IP from the pool for the duration of the connection. When the connection closes, the public IP goes back to the pool. Dynamic NAT still requires one public IP per simultaneous session, so it does not scale well. If the pool is exhausted, new connections fail.
PAT (Port Address Translation), called NAT overload by Cisco, allows many private IPs to share a single public IP by distinguishing sessions using port numbers. When multiple devices connect to the internet simultaneously, PAT adds unique source port numbers to each session so it knows which response belongs to which internal device. PAT is what your home router uses. One public IP supports thousands of simultaneous connections.
How to choose the correct answer
Static NAT: one-to-one, permanent. For servers that need inbound internet access.
Dynamic NAT: pool of public IPs, one-to-one per session, but not permanent. Cannot support inbound connections.
PAT / NAT overload: many-to-one using port numbers. The standard for home and enterprise outbound internet access.
Address terminology: inside local = private IP as seen internally. Inside global = public IP as seen externally. The exam often presents these terms in questions about which address appears in packet headers at specific points in the path.
NAT breaks end-to-end connectivity, which is why protocols that embed IP addresses in their payload (like FTP active mode) may have compatibility issues with NAT without Application Layer Gateways.