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I mean, I know each packet is sent with a MAC address, but what about streaming?

What happen if while the router is receiving one packet, a packet from another device arrives?

How can the router know that the photons colliding with the antenna are part of the first packet or the second packet?

Or is it that the speed of light is so fast that this almost never happens and the packets are just reported as corrupt and are sent again?

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That is called a collision. Both packets are lost. – vonbrand Feb 27 '13 at 4:15
up vote 18 down vote accepted

In a wireless network, only one device is actually "speaking" at once. Each other device listens and waits for the air on that channel to be quiet before speaking. This technique is called carrier sense multiple access with collision avoidance (CSMA/CA)

An RTS/CTS exchange helps all the nodes stay in sync efficiently by providing a way for one node to say "hey, I'm going to talk for this long so wait this long" to every other node.

@Petr Abdulin is correct but I think all Wifi networks use CSMA/CA. Old 10BaseT non-switched wired networks relied on carrier sense multiple access with collision detection (CSMA/CD). Collisions don't happen on networks where all nodes are connected to a switch.

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Mostly correct, except it's possible for the collisions to happen with CSMA/CA. Consider three devices A, B and C, where A and C are too far from each other to receive each other's data, but B is between them and can receive from either. A and C cannot detect collisions (as far as they are concerned, there are none), but B will not be able to receive data from either of them, unless one happens to be silent. – George Skoptsov Feb 27 '13 at 4:38
@GeorgeSkoptsov - Of course its still possible for a collision, if collisions were not possible, everything would be wireless since there wouldn't be any packet loss. – Ramhound Feb 27 '13 at 13:17
@Ramhound - Collision is not the primary reason there is packet loss, and packet loss is not the primary reason not everything is wireless. – George Skoptsov Feb 27 '13 at 15:19

If it happens that two transmissions interfere each other (collision), then both transmissions will be corrupted and they will be retransmitted after a random delay, reducing risk of collision repeat.

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