Software firewall

A software firewall the controls both inbound and outbound traffic providing a great deal of security. However, firewalls also give computer users more problems than probably any other security tool. The firewall included in Windows XP and Vista is pretty easy to use but does not provide as much security as other third party firewalls. The Windows XP firewall and Vista firewalls only provide inbound protection (remote computer trying to connect to your computer) . They do not provide outbound protection (Vista firewall has a very clunky outbound protection). Outbound protection is required to protect you against a trojan or other virus/spyware on your system from beaming out your information to some remote computer.

The main reason inbound/outbound firewalls cause users so much problem is that blocking internet access of essential programs can cause system instability and crashes. Additionally blocking internet access of nonessential software might make that program work incorrectly if internet access is required to perform its function.

Figure 1. Windows firewall blocks only incoming traffic while third party firewalls control both incoming and outgoing traffic.

Three free software firewalls that work on Windows Vista (and other versions of Windows) are:

1. Zone Alarm Free (chose Basic Firewall Only on the right of the screen) has been one of the leading free firewalls for years. They offer products for all versions of Windows. However, recently their free product has done poorly in leak testing. Also I recently installed it on a new Toshiba laptop and it caused the computer to crash repeatedly until it was removed. If this happens, reboot in Safe Mode and unistall Zone Alarm or use System Restore to get rid of Zone Alarm. Here are possible reasons for the crashing.
2. PC Tools Firewall Plus is easy to use (like Zone Alarm). It has a list of known internet applications that it will automatically allow to access the internet (less popup warnings). This firewall also works on all versions of Windows. Ease of use is a real plus with this program. Somehow one time "Allow" (without remembering) does not work. This is a an alternative to Zone Alarm if Zone Alarm does not work on your system.
3. Vista Firewall Control is and add on application for the built in Windows Vista firewall that converts the almost unusable outgoing protection into an interface more like Zone Alarm in which popup messages will come when programs on your computer attempt to access the internet. This program only works with Vista. I was disappointed with the functionality of this program because when a warning pops up and you click "allow" the program that was trying to access the internet will to connect. You will have to close the program and run it again after you clicked "allow" in Vista Firewall Control.

Using a firewall (Zone Alarm Free)
A software firewall adds some human intelligence to computer security. It puts the computer user in the drivers seat in regards to how their computer talks to the internet. The main reason inbound/outbound firewalls cause users so much problem is that blocking internet access of essential programs can system instability and crashes. Additionally blocking internet access of nonessential software might make that program work incorrectly if internet access is required to perform its function.
Setting permissions for Windows applications
Modern firewalls like, Zone Alarm Free, Automatically grant the appropriate permissions for essential Windows applications like "Generic Host Process for Win32 Services" and to "Run a DLL as an App". If access is denied to these essential applications, Windows will likely crash. It is a good idea to give permission to Windows applications as shown in Figure 2. "Spooler SubSystem App" is requires the permission in Figure 2 if you wish to print over the network. "Windows Explorer " is requires the permission in Figure 2 if you wish to share files over the network.

Figure 2. Typical program that require internet accessin Windows XP. Note that blocking Windows applications (labeled in red in the left margin) can lead to system instability and crashes. Internet browsers, PC phones, virus/spyware protection programs, and remote backup programs all typically need to access the internet. Internet phone services need to act as a server as well as have internet access.

Figure 3. Typical program that require internet access in Windows Vista.

Setting Permissions for non-Windows applications
This takes some common sense on your part. If you know a particular application needs access to the internet, you should put a check in the box "Remember this setting" and answer "Allow". Examples of internet requiring applications are web browsers, spyware/virus protection updaters, internet backup programs, and PC telephones.
General firewall usage guidelines
1. Let Windows applications have the access they want unless you know what you are doing.
2. "Denying" access of non-Windows programs usually will only prevent that program from not working correctly at worst. Usually there are no Windows crashes from an incorrect "Deny".
3. Use your own common sense as to whether to "Allow" or "Deny" based on whether you think the program should be trying to access the internet or your local network.
4. To do File and Printer Sharing on Zone Alarm, you have to put your network adapter in the "Trusted Zone." (Firewall->Zones)

Videos
Using Zone Alarm Free (including enabling File & Printer Sharing if you have a network)