Frame Relay is in fact a level two protocol. In most cases, Frame Relay is defined as a "packet mode" service, organizing data into individually addressed units, know as frames. This method of organization gives frame relay statistical multiplexing and port sharing characteristics.
Frame Relay eliminates all layer 3 processing, in practice, this means that there is no layer 3 information or functions required in order for a packet to traverse a frame relay network. There are only a few layer 2 functions used, also known as "core aspects". These functions check for a valid and error-free frame but will not request retransmission in the case an error is found.
In today's networks, retransmission and correction are functions performed by higher layer protocols such as TCP, so in the case a frame contains an error, the receiving node is expected to correct the error or request a retransmission. Other higher layer functions can include sequence and acknowledgement numbers, window rotation and more.
When considering all these functions have been stripped out of frame relay, you can expect increases in throughput, as relaying frames will take much less processing. The less overhead and processing a frame requires, the faster it will be able to move through a network.
I hope the above helps answer all your questions.
This was first published in August 2003