Following is a diagram and description of all the layers in the ISO standard for communications. For more on the purpose of this model, see OSI. For comparisons between the OSI model and other protocol stacks, see TCP/IP, NetWare, ATM, SNA and SS7.

Application - Layer 7
This top layer defines the language and syntax that programs use to communicate with other programs. The application layer represents the purpose of communicating in the first place. For example, a program in a client workstation uses commands to request data from a program in the server. Common functions at this layer are opening, closing, reading and writing files, transferring files and e-mail messages, executing remote jobs and obtaining directory information about network resources.

Presentation - Layer 6

When data are transmitted between different types of computer systems, the presentation layer negotiates and manages the way data are represented and encoded. For example, it provides a common denominator between ASCII and EBCDIC machines as well as between different floating point and binary formats. Sun's XDR and OSI's ASN.1 are two protocols used for this purpose. This layer is also used for encryption and decryption.

Session - Layer 5

Provides coordination of the communications in an orderly manner. It determines one-way or two-way communications and manages the dialog between both parties; for example, making sure that the previous request has been fulfilled before the next one is sent. It also marks significant parts of the transmitted data with checkpoints to allow for fast recovery in the event of a connection failure.

In practice, this layer is often not used or services within this layer are sometimes incorporated into the transport layer.

Transport - Layer 4

The transport layer is responsible for overall end to end validity and integrity of the transmission. The lower data link layer (layer 2) is only responsible for delivering packets from one node to another. Thus, if a packet gets lost in a router somewhere in the enterprise internet, the transport layer will detect that. It ensures that if a 12MB file is sent, the full 12MB is received.
"OSI transport services" include layers 1 through 4, collectively responsible for delivering a complete message or file from sending to receiving station without error.

Network - Layer 3
The network layer establishes the route between the sending and receiving stations. The node to node function of the data link layer (layer 2) is extended across the entire internetwork, because a routable protocol contains a network address in addition to a station address.
This layer is the switching function of the dial-up telephone system as well as the functions performed by routable protocols such as IP, IPX, SNA and AppleTalk. If all stations are contained within a single network segment, then the routing capability in this layer is not required. See layer 3 switch.

Data Link - Layer 2
The data link is responsible for node to node validity and integrity of the transmission. The transmitted bits are divided into frames; for example, an Ethernet, Token Ring or FDDI frame in local area networks (LANs). Frame relay and ATM are also at Layer 2. Layers 1 and 2 are required for every type of communications. For more on this layer, see data link protocol.

Physical - Layer 1
The physical layer is responsible for passing bits onto and receiving them from the connecting medium. This layer has no understanding of the meaning of the bits, but deals with the electrical and mechanical characteristics of the signals and signaling methods. For example, it comprises the RTS and CTS signals in an RS-232 environment, as well as TDM and FDM techniques for multiplexing data on a line. SONET also provides layer 1 capability.

The Protocol Stack Using TCP/IP as a model, the sending application hands data to the transport layer, which breaks it up into the packets required by the network. It stores the sequence number and other data its header. The network layer adds source and destination data in its header, and the data link layer adds station data in its header. On the other side, the corresponding layer reads and processes the headers and discards them.

Ref: http://www.techweb.com/encyclopedia/defineterm?term=OSI+MODEL