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A Stateful Inspection Firewall is characterized by its ability to monitor and manage the state of active connections. This type of firewall keeps track of the state of network connections (such as TCP streams) and makes decisions based on both the rules defined for the packets and the context of the traffic.

When a packet arrives, the firewall examines not only the packet headers (such as source and destination IP addresses and ports) but also the session state, ensuring that packets are part of a recognized ongoing connection. If a packet doesn't match a known state or connection, it may be dropped, enhancing security.

In contrast, firewalls that only examine the source IP ignore the connection state and context, limiting their effectiveness in managing traffic. Meanwhile, firewalls without connection tracking would be less capable of discerning whether incoming packets are part of an established connection, lowering their utility in modern security scenarios. Lastly, a firewall that allows all incoming packets would not provide any filtering or security measures, which is contrary to the fundamental purpose of a firewall.

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