Network / Port Address Translation

Network Address Translation (NAT) is a technique which may be used in a routing device to convert between a "public" and a "private" address. Packet headers are rewritten as necessary; for some protocols it may be necessary to rewrite addresses embedded within the packet body for correct operation.

Port Address Translation (PAT), is an extension to network address translation (NAT) that permits multiple devices on a local area network (LAN) to be mapped to a single public IP address. The goal of PAT is to conserve IP addresses.

Most home networks use PAT. In such a scenario, the Internet Service Provider (ISP) assigns a single IP address to the home network's router. When Computer X logs on the Internet, the router assigns the client a port number, which is appended to the internal IP address. This, in effect, gives Computer X a unique address. If Computer Z logs on the Internet at the same time, the router assigns it the same local IP address with a different port number. Although both computers are sharing the same public IP address and accessing the Internet at the same time, the router knows exactly which computer to send specific packets to because each computer has a unique internal address.

Port Address Tranlation is also called porting, port overloading, port-level multiplexed NAT and single address NAT.

The following video may explain Network and Port address:

references:
http://searchnetworking.techtarget.com/definition/Port-Address-Translation-PAT
http://www.oucs.ox.ac.uk/network/nat/
http://www.youtube.com/watch?v=tZRgSrgEvd0