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Multiplexing is a process in which multiple data channels are combined into a single data or physical channel at the source. Multiplexing can be implemented at any of the OSI layers. Conversely, demultiplexing is the process of separating multiplexed data channels at the destination. One example of multiplexing is when data from multiple applications is multiplexed into a single lower-layer data packet. Figure 1-18 illustrates this example.

Another example of multiplexing is when data from multiple devices is combined into a single physical channel (using a device called a multiplexer). Figure 1-19 illustrates this example.

A multiplexer is a physical layer device that combines multiple data streams into one or more output channels at the source. Multiplexers demultiplex the channels into multiple data streams at the remote end and thus maximize the use of the bandwidth of the physical medium by enabling it to be shared by multiple traffic sources.

Some methods used for multiplexing data are time-division multiplexing (TDM), asynchronous time-division multiplexing (ATDM), frequency-division multiplexing (FDM), and statistical multiplexing.

In TDM, information from each data channel is allocated bandwidth based on preassigned time slots, regardless of whether there is data to transmit. In ATDM, information from data channels is allocated bandwidth as needed by using dynamically assigned time slots. In FDM, information from each data channel is allocated bandwidth based on the signal frequency of the traffic. In statistical multiplexing, bandwidth is dynamically allocated to any data channels that have information to transmit.