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IPsec Overview: A secure network starts with a strong security policy that defines the freedom of access to information and dictates the deployment of security in the network. Cisco Systems offers many technology solutions for building a custom security solution for Internet, extranet, intranet, and remote access networks. These scalable solutions seamlessly interoperate to deploy enterprise-wide network security. Cisco System's IPsec delivers a key technology component for providing a total security solution. Cisco's IPsec offering provides privacy, integrity, and authenticity for transmitting sensitive information over the Internet.
IPsec provides secure tunnels between two peers, such as two routers. You define which packets are considered sensitive and should be sent through these secure tunnels, and you define the parameters which should be used to protect these sensitive packets, by specifying characteristics of these tunnels. Then, when the IPsec peer sees such a sensitive packet, it sets up the appropriate secure tunnel and sends the packet through the tunnel to the remote peer.
More accurately, these tunnels are sets of security associations (SAs) that are established between two IPsec peers. The security associations define which protocols and algorithms should be applied to sensitive packets, and also specify the keying material to be used by the two peers. Security associations are unidirectional and are established per security protocol (AH or ESP).
With IPsec you define what traffic should be protected between two IPsec peers by configuring access lists and applying these access lists to interfaces by way of crypto map sets. Therefore, traffic can be selected based on source and destination address, and optionally Layer 4 protocol, and port. The access lists used for IPsec only determine which traffic should be protected by IPsec, not which traffic should be blocked or permitted through the interface. Separate access lists define blocking and permitting at the interface.
A crypto map set can contain multiple entries, each with a different access list. The crypto map entries are searched in order—the router attempts to match the packet to the access list specified in that entry. It is good practice to place the most important crypto map entries at the top of the list.
When a packet matches a permit entry in a particular access list, and the corresponding crypto map entry is tagged as cisco, then CET is triggered, and connections are established if necessary. If the crypto map entry is tagged as ipsec-isakmp, IPsec is triggered.
If no security association exists that IPsec can use to protect this traffic to the peer, IPsec uses the Internet Key Exchange protocol (IKE) to negotiate with the remote peer to set up the necessary IPsec security associations on behalf of the data flow. The negotiation uses information specified in the crypto map entry as well as the data flow information from the specific access list entry.
If the crypto map entry is tagged as ipsec-manual, IPsec is triggered. If no security association exists that IPsec can use to protect this traffic to the peer, the traffic is dropped. In this case, the security associations are installed via the configuration, without the intervention of IKE. If the security associations did not exist, IPsec did not have all of the necessary pieces configured.
Once established, the set of security associations (outbound, to the peer) is then applied to the triggering packet as well as to subsequent applicable packets as those packets exit the router. Applicable packets are packets that match the same access list criteria that the original packet matched. For example, all applicable packets could be encrypted before being forwarded to the remote peer. The corresponding inbound security associations are used when processing the incoming traffic from that peer.
If IKE is used to establish the security associations, the security associations will have lifetimes set so that they periodically expire and require renegotiation, thus providing an additional level of security.
Multiple IPsec tunnels can exist between two peers to secure different data streams, with each tunnel using a separate set of security associations. For example, some data streams might be just authenticated while other data streams must both be encrypted and authenticated.
Go here for more: https://www.cisco.com/c/en/us/td/docs/net_mgmt/vpn_solutions_center/2-0/ip_security/provisioning/guide/IPsecPG1.html