Physical layer mainly deals with communication between adjacent nodes connected via. wired/wireless telecommunication links.

The basic principle of operation of the physical layer is illustrated in the diagram below:

At the sending node physical layer implementation,

• Data is treated as a stream of bits.
• The physical layer converts each bit ( 0 or 1) into an appropriate electrical or optical signal and transmits the signal via. wired or wireless telecommunication links. This conversion process is called line encoding.
• For each bit that is transmitted, the sending node physical layer transmits the corresponding electrical/optical signal for a certain finite duration of time. This duration of time is called the bit interval.

At the receiving node physical layer implementation,

• The incoming signals are first converted back into the corresponding bits. This is called line decoding and is usually the reverse process as that of  line encoding.
• The bits are then handed to the receiver’s data link layer for further processing. 

An example line encoding strategy is given in the diagram below:

In the example line coding strategy given above:

• A stream of 7 bits (1001101) are sent from the sender.
• In this line encoding strategy, a value of -5V is used to represent a digital 0 and a value of +5V is used to represent a digital 1.
• The bit interval or the duration for which the voltage corresponding to a bit is maintained on the line is 5 milliseconds.