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What does the network layer do? Where does it sit in relationship to the other four layers of our simplified network model? Network layer is the third layer of the OSI model. It performs switching and routing by creating logical paths, known as virtual circuits, for transferring data from one node to another node. Routing and forwarding are the major functions of this layer. It also performs other operations such as addressing, internetworking, error handling, congestion, control and packet sequencing.
It maintains the quality of service requested by the transportation layer. It determines how data are transferred between network devices. It Routes packets according to unique network device addresses and Provides flow and congestion control to prevent network resource depletion. The network layer provides the functional and procedural means of transferring variable length data sequences from a source to a destination host via one or more networks while maintaining the quality of service and error control functions.
At this layer, the computer system engages in a dialogue with the network to specify the destination address and to request certain network facilities, such as priority  Network Layer consists of three sub layers: Sub network Access: This layer considers protocols that deal with the interface to networks, such as X. 25. Sub network Dependent Convergence: This layer is necessary to bring the level of a transit network up to the level of networks on either side. Sub network Independent Convergence: It handles transfer across multiple networks. The major Functions of the network layer are: Routing:

The most outstanding function of network layer is routing which includes Moving data across a series of interconnected networks the network layer. At the network layer, the devices and software routines handles incoming packets from various sources, determines their final destination, and then transfers the data to their destination. Logical Addressing: Every communication device in a network of an logical address, which is also called as “layer three address”. The Internet Protocol (IP) is the network layer protocol which is the best known example of network layer and every machine consists of its own IP address.
It manages the connectionless transfer of data one hop at a time, from end system to ingress router, to router to router, and from egress router to destination end system. It is not responsible for reliable delivery to a next hop, but only for the detection of eroded packets so they may be removed. Connection model: The OSI Network Layer protocol can be either connection-oriented, or connectionless. In general, the TCP/IP Internet Layer supports only the connectionless Internet Protocol (IP). Message forwarding: This is the most important function of network layer.
Since many networks are partitioned into sub networks and connect to other networks for wide-area communications, networks use specialized hosts, called gateways or routers to forward packets between networks. Datagram Encapsulation: Network layer performs encapsulation of messages received from higher layers by placing them into datagrams which are also referred to as packets with a network layer header. Fragmentation and Reassembly: The major function of the network layer is transmitting messages down to the data link layer. Some data link layer technologies consist of certain limitations on the length of any message that can be sent.
If the packet that the network layer wants to send is too large, the network layer has to fragment the packet before transmitting it to data link layer. It transmits each piece to the data link layer. The fragmented pieces are then reassembled once they arrive at the network layer on the destination machine. Handling and Diagnostics: At the network layer Special protocols are used to allow devices that are logically connected, or that are trying to route traffic, to exchange information about the status of hosts on the network or the devices themselves.