This hint applies to sharing a high speed Internet connection, such as a cable modem, with other computers on your local Ethernet network. It's not necessary if you are sharing a high speed Internet connection with your PowerBooks on your Airport network instead of the Ethernet network. Internet Sharing allows all the other computers to access the Internet through your Mac. It turns your Mac into kind of a router.
Routers usually have two ethernet ports: One public port for connection to the outside world, and one private port for connection to the internal private network. This allows the router to protect any traffic in the internal private network so that it stays private. The problem is that most Macs have only one Ethernet port.
You can still do Internet sharing with your built in Ethernet port but the internal data has no protection. It can be risky if some data gets out. If you have any doubts, go to the Internet Sharing Control Panel and turn on "Share the Connection with other computers on Built-in Ethernet". You'll get this scary message:
Caution:....Yes. Your Mac's DHCP server (from Rendezvous) could set your neighbor's IP address to the incorrect number! Ouch! This can happen because cable modems make it as if you and your neighbors are all on the same LAN.
In some cases (if you use a cable modem, for example) you might unintentionally affect the network settings of other ISP customers, and your ISP might disconnect you to prevent network disruption.
You are connected to the Internet over Built-in Ethernet. This connection will be shared with computers connected to Airport and PCI Ethernet Slot 3.I connected the PCI Ethernet card and the other computers to a hub. To my amazement (I'm used to Windows), when I started up the other computers, it all just worked.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20020911070730972