GNU/Linux Desktop Survival Guide by Graham Williams
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Cables

Connecting two computers directly, with a cable from one Ethernet card to another, requires the use of crossover cables. Connecting computers via a hub or switch or an all-in-one ADSL router requires straight-through cables.

In a little more detail, each Ethernet card has receiver (RX) and transmitter (TX) wires. Each computer's RX must connect to the other computer's TX, and vice versa. A crossover cable thus wires RX to TX and TX to RX so that the proper connections are made directly between two network cards. For a hub, switch, or router, the RX/TX exchange is already done within the device so only a straight-through cable is needed. Many single Ethernet ADSL modems have a reversed Ethernet port with RX and TX pre-crossed so that to connect it to a single computer you only need a straight-through cable, as with the usual devices, and not a crossover cable that one might come to expect. When connecting such a modem to a separate hub you will need to plug a straight-through cable from the modem into the uplink port of the hub which should allow for the crossed RX/TX.