Are packets sent inside frames, or are frames inside packets?

You're not the only person who is confused with packets, frames and segments! It took me personally quite some time to be able to clearly understand what they represent and where they are bound.

The key here is to fully understand the OSI Model. Depending on the Layer we are talking about, the naming and...

contents of a so-called 'packet' or 'frame' changes.

Beginning from the application Layer (Layer 7), and up to Layer 5, the constructed data is called a "segment". As it moves down the OSI Model to the next Layer (4) it is called a "datagram". On the next Layer (3) we call it a packet and on the final Layer (2) it is called a "frame".

So, a frame contains packets, packets contain datagram's and datagram's contain segments!

If you like, you can download a white paper I created or the OSI Model, which also shows the above in a clear diagram. You can grab your copy from my Web site, www.Firewall.cx, just look in the Downloads>Projects & Documents> Documents, PDF Files&More section.