Setting up a Wifi network will allow all your computers (and any guests you want to share your network with) to get online without needing to plug in an ethernet cable. A wireless network can also make it easy to stream music and video to any device on the network. Still got some old PCs that don't have wireless cards? That's okay, most wifi routers have a few ethernet ports as well.
Once you have your router the next step is choosing a good location. Try to install your router in a central location so that every room in your house is covered by the wifi signal.
To set up the network, follow these steps:
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Step 1: Connect Everything
Connect your existing modem to the wireless router using an Ethernet cable (be sure to connect the modem to the port labeled "Internet" on most routers, otherwise you may not be able to connect to the internet. Refer to the documentation of your router). This moves the internet connection from your modem to the wireless router. Once that's done, plug your PC into the back of the router using the Ethernet jacks. We'll need this connection to configure the wifi network.
Step 2: Turning it on
Turn on your modem first, then the wireless router and finally the computer. The order is important since each successive device need to to detect the connection to the one that precedes it in the chain.
Step 3 Set up the network
Check the documentation that came with your wireless router for the default IP address used by the device. Launch your computer's Web browser and head to IP address of the router.
You should see a login window requiring a username and password. The default values should be in your router's documentation.
Once you've logged in, you'll see your router's settings page. The first step is make sure you change the default admin password so other users won't be able to login to the settings page and reconfiguring the router.
The next thing you'll probably want to do is changing the SSID value of the router. This is the name broadcasted by the router to identify it across the network. Chose a unique SSID name and save your changes (this will likely reboot the router).
Scan for wireless networks and see which channels are in use. Try to find a free one, or one with minimal interference. In channel 1-11 a channel is only completely free when there is nothing on the channel and three channels up or down, so 'minimal interference' is usually what you have to settle for. The tool you use to find your network from your laptop might list channels and some idea of signal strength of other networks. Or you could use a dedicated wireless scanning application. For Windows versions: use Netstumbler scanning software, for Linux: use kismet (not very easy to set up though).
Step 3 Turn on encryption
Right now your wifi network is up and running, but anyone can access it. If that doesn't bother you, then you're done. However, you might want to enable some sort of wifi encryption to protect your network and make sure that only trusted computers have access.
Different routers support different levels of encryption so what you use is up to you, though we should note that WEP encryption is trivially easy to defeat; you'll be much better off using WPA Personal or WPA Enterprise if your router supports it.
Step 4 Connect
Once you're happy with your settings, disconnect your PC and then head to your network settings tool and you should see your new wifi network listed under available networks. Select your network and type in your password (if you're using one) to connect.
In the Future
With more public wifi hotspots showing up everyday, the need for home networks is dwindling. The promise of wifi through electrical outlets could eventually eliminate the need for home networks -- streaming data from one PC to another can already be implemented over the same wires that deliver power on your doemstic circuits.