How the Telnet Application Works
Telnet is an IP application-layer protocol (layer 7) that gives you a console session on a remote machine. It is one of the few remaining applications that has been heldover from the early days of networking. The console session is text-based, not GUI. The holdover to a text based command system is one of the features that makes it not very popular. However, with Telnet, you can connect, configure, or otherwise complete operations on a remote computer. You are expected to be able to manuver your way around the computer system as in the old (DOS) days.
In general, you need two computers to make a telnet connection. You need a remote telnet server and the telnet client application on yours that will connect to it. TCP Port 23 is needed as the default port.
As a connection and configuration program it is quite old. There are many other programs that can be used for remote connection such as MS Remote Desktop Connection, Ultra VNC, AnyPlace Control, PC Anywhere to name just a few programs. But some companies, like Cisco, still use it extensively since their routers and switches are configured using a command-line interface. It also has several security issues; the most glaring is that the authentication elements, the username and password, are passed over the network as clear text. So the system is vulnerable to a third party hacking, compromise, and intrusion.