Layer 3 switches were conceived as a technology to improve on the performance of routers used in large local area networks (LANs) like corporate intranets. The key difference between Layer 3 switches and routers lies in the hardware technology used to build the unit. The hardware inside a Layer 3 switch merges that of traditional switches and routers, replacing some of a router's software logic with hardware to offer better performance in some situations.
Layer 3 switches often cost less than traditional routers. Designed for use within local networks, a Layer 3 switch will typically not possess the WAN ports and wide area network features a traditional router will always have.