Windows XP Service Pack 2 (SP2), currently a Release Candidate in Beta testing, includes significant enhancements to the Windows Firewall component, previously known as the Internet Connection Firewall (ICF). Windows Firewall is a stateful host-based firewall that discards unsolicited incoming traffic, providing a level of protection for computers against malicious users or programs.
To provide better protection for computers connected to any kind of network (such as the Internet, a home network, or an organization network), Windows XP SP2 enables Windows Firewall on all network connections by default. This new behavior can impair some types of communications. This article describes how to deploy the appropriate configuration settings for Windows Firewall on an organization network so that it is enabled and providing protection, and so that communications are not impaired.
Download: Deploying Windows Firewall Settings for Microsoft® Windows® XP with Service Pack 2
View: Manually Configuring Windows Firewall in Windows XP Service Pack 2
View: Windows XP Service Pack 2: A Developer's View
To provide better protection for computers connected to any kind of network (such as the Internet, a home network, or an organization network), Windows XP SP2 enables Windows Firewall on all network connections by default. This new behavior can impair some types of communications. This article describes how to deploy the appropriate configuration settings for Windows Firewall on an organization network so that it is enabled and providing protection, and so that communications are not impaired.
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Project 2002 Service Pack 1 (SP1) for Multilingual User Interface Pack
Project 2002 Service Pack 1 for Multilingual User Interface Pack ensures that Microsoft Project 2002 Service Pack 1 performs with complete functionality when you use a Project 2002 Multilingual User Interface Pack.
SharePoint Portal Server 2001 Service Pack 3 (SP3): KB837017
SharePoint Portal Server 2001 Service Pack 3 (SP3) is a cumulative service pack that provides updates based on the Microsoft Trustworthy Computing Initiative, and the latest fixes for customer-reported issues. SP3 is divided into five parts to ease downloads. All five parts are required. We strongly encourage customers to install SP3 on all Microsoft SharePoint Portal Server servers.
Visio 2002 Service Pack 2 (SP2)
Visio 2002 Service Pack 2 (SP2) provides the latest updates to Microsoft Visio 2002. SP2 contains significant security enhancements as well as stability and performance improvements. This service pack applies to any level of Microsoft Visio 2002. It contains all updates included in Visio 2002 Service Release 1 (SR1), in addition to updates released after SR1.

be it of the software or hardware variety?
And the incorrect statement of the year award goes to... Octol!
Some software firewalls are process based, and only allow specific user control processes to talk out from the pc, which is exactly what he meant.
Of course, any firewall, either hardware of software doesn't imply a safe policy of allowing specific traffic running over specific ports. Especially as more and more services are running over firewall safe ports - 21, 80, 8080, 443, etc.
so true.
Am I right? I mean thats what I need right?
As Octol correctly stated - in general neither a home user's hardware firewall nor Windows firewall will know or care what application initiated an outbound connection (such as call-home malware). It will simply see it as a solicited connection and therefore allow the reverse communication from the malware client (or server depending how you want to look at it
IMHO before you connect to any public network: turn off the Windows Firewall, install a personal firewall with application filtering including DLL injection & process spoofing/chaining detection (and an anti-virus package while you're at it...and a startup monitor if you're paranoid like me
Nope, that isn't what Octol stated, he didn't specify home users. And a properly configured home router DOES block out bound connections (depending on the port obviously), you should know better.
A *FAR* simpler solution for the user is scheduled AV / adware scans from properly congifured software (ie: set to update frequently).
Assuming a user understands the concepts of firewalling, ports and IP addressing is stupidity and totally unfair. Give an app a sensible name, even on a port that they recognise, and chances are they'll permit the traffic.
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