The term “encapsulation” is used to describe a process of adding headers and trailers around some data. For example, when you send an email using your favorite email program (like Outlook or Thunderbird) that email is sent from the Application layer to the Transport layer. The Transport layer encapsulates the data and adds its own header (with its own information, such as which port will be used) and passes the data to the Internet layer, which again encapsulates the received data and adds its own header, usually with information about the source and destination IP addresses. The Internet layer than passes the data to the Network Access layer. This layer is the only layer that adds both a header and a trailer. The data is then sent through a physical network link.
Each layer adds its own information:
The term “decapsulation” refers to the process of removing headers and trailers as data passes from lower to upper layers. This process happens on a computer that is receiving data.
Frame, packet, segment
Frame – the term “frame” refers to the encapsulated data defined by the Network Access layer. A frame can have a header and a trailer that encapsulate a data section.
Packet – the term “packet” is used to describe the encapsulated data defined by the Internet layer. A packet can have a header with the source and destination IP addresses.
Segment – the term “segment” describes encapsulated data defined by the Transport layer. A segment can have a header with informations such as source and destionation port numbers, sequence and acknowledgment numbers, etc.