A packet sniffer is a utility that listens on a network for transferred data. Packet sniffing allows individuals to capture data as it is transmitted over a network. This technique is used by network professionals to diagnose network issues, and by malicious users to capture unencrypted data, like passwords and usernames. If this information is captured in transit, a user can access a system or network.
How can I protect myself?
To keep information confidential, use encrypted connections. You might also consider encrypting all sensitive data sent over the Internet or network (e.g., e-mails). For example, e-mails can be encrypted using PGP (pretty good privacy), anyone still using Telnet should consider using SSH (secure shell) instead, and instead of FTP (file transfer protocol) you can use SFTP (SSH file transfer protocol).