Local area network is not a precise term, but rather a general type of networks loosely classified by the following:
- "Privately" owned
Just another way of saying that one person or organization has control over the entire network.
- Small physical area covered
This means that transmission latency will be low.
- Limited numbers of computers
In practice these can get quite large, but hundreds or thousands of computers are still nothing compared to the millions on the Internet.
- Uniform transmission technology
This makes designing LAN hardware much easier because a certain level of homogeneity may be assumed.
These are loose criteria. You can easily find counterexamples to all these principles, but nevertheless they are important because they define a huge number of existing and theoretical networks. Compared to the other major class of networks best exemplified by the Internet, LANs are incredibly easy to design and maintain. For instance, the principle of private ownership makes it much easier to trust other nodes on the network; security may be a non-issue. The limited number of computers means we can use simple flooding strategies without fear of wasting bandwidth. These factors also conspire to make LANs the ideal venue for gamers, who cart customized cases and 23" monitors for miles just to assemble the perfect gaming environment.
Ethernet is the ultimate testament to the simplicity of LANs. You can simply plug in a bunch of computers into a hub via ethernet, assign IP addresses randomly and have a working network. Appletalk was even simpler, with the network being completely plug and play. Of course with a little more thought it's possible to optimize performance in specific ways; a token ring LAN for instance, offers very high bandwidth utilization.
With LANs we are able to experiment with many different topologies, transmission protocols, allocation strategies, and minimal error correction. In general, anything not considered a LAN is a Wide Area Network (WAN). On WANs suddenly you must assume a messy topology, fault-tolerant transmission protocols, complex routing, and heavy-duty error correction. WANs may be the area where the most research occurs, but LANs are a much prettier park to play in.