EXPERT RESPONSE
Layer 2 switches can "read" only Layer 2 information, which means they can understand the source and destination MAC address of a frame, but are unable to process any Layer 3 (IP header) information.
When a Layer 2 switch receives a frame, it will lookup its MAC address table and forward the frame out the correct port, based on the frame's destination MAC address.
Layer 3 switches work in a similar way, but are also able to process Layer 3 information effectively. This means they can perform IP routing between subnets or virtual LANs (VLANs).
For more information:
 Read Chris Partsenidis' article on switches and bridges.
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