Finally, I am able to setup a basic home network without router. One host laptop running windows 7 is connected to usb data card and other client laptop running XP is able to access internet.
After trying connectify,virtual router etc and ending up with some error, I finally tried adhoc setup on windows 7 native setup, created a network called mynetwork and shared the internet connection. Both machines are on same workgroup, in case it was needed.
Then on XP, I connected to this wireless mynetwork and that's it. When I tried to browse a site, I was able to!!
But, now this got me thinking, how the client machine browser knows to use internet conenction from host machine. I don't recall having done any manual setup on firefox on client machine to tell it to use myconnection to access internet, then how does it know it? What are the various steps involved?
If I try to break down the steps, when a browser receives a request, it checks for all the currently active network connections. In this client case, only mynetwork wireless network is active, so browser forwards the request to this network using some protocol (what it is called?) and the host machine on receiving this request recognizes that it is an http internet request and uses its local internet connection (because it is setup to share internet) to service the request and forwards the output to the client machine. Is my understanding correct? What all different protocols come into picture here?