The data link layer provides addressing that is used in transporting a frame across a shared local media. Device addresses at this layer are referred to as physical addresses. Data link layer addressing is contained within the frame header and specifies the frame destination node on the local network. The frame header may also contain the source address of the frame.

Unlike Layer 3 logical addresses, which are hierarchical, physical addresses do not indicate on what network the device is located. Rather, the physical address is a unique device specific address. If the device is moved to another network or subnet, it will still function with the same Layer 2 physical address.

An address that is device-specific and non-hierarchical cannot be used to locate a device across large networks or the Internet. This would be like trying to find a single house within the entire world, with nothing more than a house number and street name. The physical address, however, can be used to locate a device within a limited area. For this reason, the data link layer address is only used for local delivery. Addresses at this layer have no meaning beyond the local network. Compare this to Layer 3, where addresses in the packet header are carried from source host to destination host regardless of the number of network hops along the route.

If the data must pass onto another network segment, an intermediate device, such as a router, is necessary. The router must accept the frame based on the physical address and de-encapsulate the frame in order to examine the hierarchical address, or IP address. Using the IP address, the router is able to determine the network location of the destination device and the best path to reach it. Once it knows where to forward the packet, the router then creates a new frame for the packet, and the new frame is sent onto the next segment toward its final destination.

The figure highlights Layer 2 address requirements in multi-access and point-to-point topologies.