How Does a VPN Work?

How Does a VPN Work? The Complete Technical Explanation

When Australians ask me "how does a vpn work," they're often looking to understand the mechanism behind this privacy technology before trusting it with their internet traffic. This is wise—you should understand any tool you're using to protect your digital security. In this detailed explanation, I'll break down exactly how a VPN works, from the moment you click "connect" to how your data travels securely across the internet.

A Virtual Private Network (VPN) creates an encrypted tunnel between your device and a server operated by the VPN service. All your internet traffic passes through this tunnel, making it invisible to anyone trying to intercept or monitor it. But there's much more to the story than this simple description, and understanding the details will help you appreciate both the power and limitations of VPN technology.

What Is VPN and Why Do I Need It?

Before diving into the technical mechanics, let's establish what a VPN actually is. The question "what is vpn and why do i need it" encompasses both the technology itself and its practical applications. VPN stands for Virtual Private Network—"virtual" because it creates a private network connection over the public internet, "private" because it encrypts your data and hides your online activities, and "network" because it connects your device to remote servers.

You need a VPN because, without one, your internet traffic travels in plain view of your Internet Service Provider (ISP), network administrators, potential hackers, and in Australia's case, entities with access to the mandatory metadata your ISP collects. A VPN addresses these privacy concerns by encrypting your traffic and routing it through servers that mask your identity and location.

The Journey of Your Data Without a VPN

To understand how a VPN changes things, first consider what happens when you browse the internet without one. When you type a website address into your browser (say, "example.com.au"), here's the sequence of events:

1. Your device sends a DNS query to your ISP's DNS server asking for the IP address of example.com.au
2. The DNS server responds with the IP address
3. Your device establishes a connection to that IP address
4. All data exchanged between your device and the website passes through your ISP's infrastructure
5. Your ISP can see which websites you visit, when you visit them, and how long you stay
6. Under Australian law, your ISP must store this metadata for two years

Even if the website uses HTTPS encryption (which most do nowadays), your ISP still sees which domain you're accessing. They might not see the specific pages you view or the data you submit, but they know you visited that website, and they're required to log this information.

How a VPN Works: Step-by-Step Process

Now let's examine exactly how a VPN transforms this process. Understanding how a VPN works requires following your data through several stages:

Does VPN Change IP Address?

One of the most common questions I hear is "does vpn change ip address?" The answer is yes, and this is one of the most important functions of a VPN. Your IP (Internet Protocol) address is a unique identifier assigned to your internet connection. It reveals your approximate geographic location and can be used to track your online activities across different websites.

When you connect to a VPN, websites and online services see the IP address of the VPN server you're connected to, not your real IP address. This has several important implications:

Geographic Location Masking

If you're in Melbourne and connect to a VPN server in London, websites will think you're browsing from London. This is how VPNs enable access to geo-restricted content—streaming services, news websites, and other platforms that limit access based on location will treat you as a user in whatever country your VPN server is located.

Privacy Protection

By hiding your real IP address, a VPN makes it significantly harder for websites to track you across the internet. Whilst sophisticated tracking methods exist beyond IP addresses (like browser fingerprinting), IP address masking remains a crucial privacy protection layer.

ISP Obfuscation

Your ISP can see that you're connected to a VPN server, but they can't see which websites you visit or what you do online. In their logs, all they see is encrypted data flowing between your connection and the VPN server's IP address. This is particularly important in Australia where ISPs are required to retain metadata about your online activities.

What Does a VPN Hide from Prying Eyes?

Understanding "what does a vpn hide" requires examining the different parties who might be interested in your internet activities and what information remains private from each:

Hidden from Your ISP (Telstra, Optus, TPG, etc.)

Your ISP can no longer see:

• Which websites you visit (they only see the VPN server's address)
• What pages within websites you access
• What data you send or receive from websites
• Which online services you use
• What files you download or upload

Your ISP can still see:

• That you're using a VPN
• How much data you're transferring
• When you're online
• The IP address of the VPN server you're connected to

Hidden from Websites and Online Services

Websites can no longer see:

• Your real IP address (they see the VPN server's IP)
• Your actual geographic location (they see the VPN server's location)
• Your ISP information

Websites can still see:

• Any information you voluntarily provide (login credentials, personal details, etc.)
• Browser fingerprinting information (unless you use additional privacy tools)
• Cookies and tracking data (unless you clear them or use privacy extensions)

Hidden from Network Administrators and Hackers

On public Wi-Fi networks or corporate networks, VPN encryption prevents:

• Network administrators from seeing your browsing activities
• Hackers from intercepting your passwords, credit card details, or personal data
• Man-in-the-middle attacks that could compromise your security

How Does VPN Protect You? Security Mechanisms Explained

When people ask "how does vpn protect you," they're usually concerned about specific threats. Let me break down the various protection mechanisms a VPN provides:

Encryption: The Foundation of VPN Security

The primary security mechanism is encryption. Modern VPNs use AES-256 encryption, which scrambles your data using a 256-bit key. To put this in perspective, even with the most powerful computers available today, brute-forcing a 256-bit encryption key would take billions of years. This encryption means that even if someone intercepts your internet traffic, they see only meaningless encrypted gibberish.

Tunnelling Protocols: How Data Travels Securely

VPNs use various protocols to create and maintain the encrypted tunnel. Each protocol represents a different approach to balancing security, speed, and compatibility:

Protection from Various Threats

Different VPN features protect against different threats:

Man-in-the-Middle Attack Protection

On public Wi-Fi networks, attackers can position themselves between your device and the network, intercepting all traffic. VPN encryption makes this attack useless—the attacker sees only encrypted data they cannot decipher.

ISP Tracking Prevention

In Australia, where ISPs must retain metadata about your internet usage, a VPN prevents them from seeing which websites you visit or which online services you use. They know you're using a VPN, but they can't see through the encryption to your actual activities.

Geographic Tracking Avoidance

Websites and advertisers use your IP address to determine your location and build profiles about you. By changing your IP address to that of the VPN server, you make geographic tracking inaccurate.

DNS Leak Protection

Some VPNs include DNS leak protection, which ensures that DNS queries (looking up website addresses) also go through the VPN tunnel rather than directly to your ISP's DNS servers. Without this protection, your ISP could still see which websites you're looking up even though they can't see your actual traffic.

Kill Switch Functionality

Quality VPNs include a kill switch feature that monitors your VPN connection. If the VPN connection drops unexpectedly, the kill switch immediately disconnects your internet, preventing any unencrypted data from leaking. Once the VPN reconnects, internet access resumes. This ensures your real IP address is never exposed even during connection interruptions.

VPN Performance: How Speed and Encryption Balance

Understanding how a VPN works includes recognising that encryption and routing through remote servers comes with performance tradeoffs. Your connection will typically be somewhat slower when using a VPN compared to your direct internet connection. Several factors influence this:

Encryption Overhead

Encrypting and decrypting data requires processing power. Whilst modern devices handle this efficiently, it does add slight overhead. Stronger encryption (like AES-256) requires more processing than weaker encryption, but modern VPN protocols like WireGuard minimise this performance impact.

Geographic Distance

Data traveling from Sydney to a VPN server in Los Angeles and then to a website in Los Angeles takes longer than data going directly from Sydney to that website. However, if you're accessing an Australian website through an Australian VPN server, the distance factor is minimal.

Server Load

Popular VPN servers with many simultaneous users may experience congestion, slowing connections. Quality VPN services maintain sufficient server capacity to minimise this issue, but free VPNs often suffer from severe overcrowding.

Your Internet Connection Speed

A VPN can't make your internet faster than your base connection speed. If you have a 50 Mbps internet connection, the VPN will be somewhat slower than that. The percentage of speed reduction depends on the VPN service quality, protocol used, and server location.

For Australian users, I've tested numerous VPN services and typically find that quality providers reduce speeds by 10-30% depending on server location and protocol. WireGuard protocol typically shows the smallest performance impact, making it my recommendation for speed-conscious users.

Advanced VPN Features and How They Work

Modern VPN services include additional features beyond basic encryption and IP address masking. Understanding these features helps you make informed choices:

Split Tunnelling

Split tunnelling allows you to choose which applications or websites use the VPN connection and which use your regular internet connection. For example, you might route your web browser through the VPN for privacy whilst allowing a gaming console to connect directly for better performance. This feature provides flexibility but requires careful configuration to avoid accidentally exposing traffic you intended to protect.

Multi-Hop (Double VPN)

Multi-hop routes your traffic through two or more VPN servers sequentially. Your data goes from your device to VPN Server 1, then to VPN Server 2, then to the destination website. This provides extra privacy by making it extremely difficult to trace your connection back to your original IP address. The tradeoff is significantly reduced speed due to the additional routing.

Obfuscation

Some VPN protocols can be detected and blocked by networks or governments that restrict VPN usage. Obfuscation techniques disguise VPN traffic to look like regular HTTPS traffic, making it harder to detect and block. Whilst this isn't necessary in Australia (where VPNs are legal), it's valuable if you travel to countries with VPN restrictions.

Static vs. Dynamic IP Addresses

Most VPN services assign you a dynamic IP address that's shared with other users. Some services offer dedicated IP addresses that only you use. Shared IPs provide better anonymity (your traffic blends with other users'), whilst dedicated IPs are useful if you need to whitelist an IP address for accessing certain services.

What VPNs Cannot Do: Important Limitations

Understanding how a VPN works also means understanding its limitations. VPNs are powerful privacy tools, but they're not magic bullets that make you completely anonymous or invulnerable:

VPNs Don't Make You Completely Anonymous

Websites can still track you through cookies, browser fingerprinting, and information you voluntarily provide (like logging into accounts). If you log into Facebook through a VPN, Facebook knows it's you regardless of your IP address. VPNs protect network-level privacy, but you need additional tools and practices for complete anonymity.

VPNs Don't Protect Against Malware

A VPN encrypts your traffic but doesn't scan for viruses, malware, or malicious websites. You still need antivirus software and safe browsing practices. Some VPNs include malware blocking features, but these are supplementary to dedicated security software.

VPNs Don't Guarantee Access to All Geo-Restricted Content

Streaming services like Netflix actively detect and block known VPN servers. Whilst many quality VPN services successfully access these platforms, it's an ongoing cat-and-mouse game. A VPN that works with Netflix today might be blocked tomorrow, requiring the provider to set up new servers.

VPNs Depend on the Provider's Trustworthiness

When using a VPN, you're shifting trust from your ISP to your VPN provider. The VPN company can potentially see your internet traffic (though reputable services have strict no-logging policies). This is why choosing a trustworthy VPN provider matters tremendously—you need a company with a proven track record of protecting user privacy.

Practical Example: Following Data Through a VPN

Let's follow a practical example of how your data flows when using a VPN. Imagine you're at a café in Brisbane using public Wi-Fi, and you want to check your bank account. Here's exactly what happens with and without a VPN:

Without a VPN

1. You type your bank's website address in your browser
2. Your device sends an unencrypted DNS query over the café's Wi-Fi asking "what's the IP address of mybank.com.au?"
3. Anyone on the café's network can see you're looking up a bank website
4. Your browser connects to the bank's website using HTTPS (which encrypts the connection)
5. Your ISP's logs show you accessed this bank website at this specific time
6. This metadata is retained for two years under Australian law

With a VPN

1. You connect to your VPN, establishing an encrypted tunnel
2. You type your bank's website address in your browser
3. Your DNS query travels encrypted through the VPN tunnel—anyone on the café's Wi-Fi sees only encrypted gibberish
4. The VPN server performs the DNS lookup and connects to your bank
5. Your bank sees a connection from the VPN server's IP address, not the café's Wi-Fi
6. Data travels encrypted between you and the VPN server, then encrypted again (HTTPS) between the VPN server and your bank
7. Your ISP's logs show only that you connected to a VPN server, not which websites you visited

This example illustrates why VPNs are particularly valuable on public Wi-Fi and for protecting privacy from mandatory metadata retention.

Choosing the Right VPN Protocol

Understanding how a VPN works includes knowing which protocol to choose for different situations. Here's my guidance for Australian users:

VPN and Australian Law: How It Affects You

In Australia, using a VPN is completely legal, and understanding how a VPN works helps you see why it's such a valuable tool given our privacy legislation. The Telecommunications (Interception and Access) Amendment (Data Retention) Act requires ISPs to retain metadata about your internet usage, but a VPN prevents your ISP from collecting much of this metadata in the first place.

Your ISP will know you're using a VPN (they can see you're connected to a VPN server), but they cannot see through the encryption to determine which websites you visit or what you do online. This means that whilst the law requires them to retain certain data, using a VPN significantly limits what data is available to retain.

Empowering Yourself with Knowledge

Understanding how a VPN works empowers you to make informed decisions about your digital privacy. You now know that a VPN creates an encrypted tunnel between your device and a remote server, that it changes your IP address to the server's address, that it hides your internet activities from your ISP, and that it protects your data on public Wi-Fi networks.

You also understand the limitations—that VPNs don't make you completely anonymous, that they depend on provider trustworthiness, and that they involve some performance tradeoffs. Armed with this knowledge, you can evaluate VPN services critically and use them effectively to protect your privacy online.

The technology underlying VPNs is sophisticated, but using them is straightforward. Modern VPN applications handle all the complex cryptography, protocol selection, and connection management automatically. You simply click connect, and the technology I've explained here works behind the scenes to protect your digital privacy.

— Mia Wexford, IT Security Specialist