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Definition: encapsulation

(1) In object technology, the creation of self-contained modules that contain both the data and the processing. See object-oriented programming.

(2) The transmission of one network protocol within another. As data moves down the protocol stack from the application layer to the data link layer, each protocol encapsulates the higher level by adding its own header to the block of data passed to it. See tunneling protocol and wrapper.

Encapsulating Protocols
In this TCP/IP example, the transport layer encapsulates the data by attaching a TCP or UDP header to the packets. The network layer encapsulates the TCP packet by adding its header and so on.