Usually smaller LAN parties consist of people bringing their computers over to each others' houses to host and play multiplayer games.
These are sometimes established between small groups of friends, and hosted at a central location or one that is known to all participants. Such events are often organized quickly with little planning, and some overnight events, with some stretching into days (or even weeks). Because of the small number of players, games are usually played on small levels and/or against bots. When a broadband Internet connection is available, some LAN parties will join on-line servers, where all computers connect to the same server to play together, often on the same team. In this case, the LAN party helps bring the team in one physical location, to communicate to teammates more efficiently.
A small LAN party requires a hub/switch, with enough ports to accommodate all the players, a fair amount of power, and suitable surfaces for all the computers. Providing refreshments is often also a duty of the host, though guests are usually asked to contribute. In larger parties where participants may not all know each other personally, an entry fee may even be charged. Another tradition of some small groups is to purchase large amounts of fast food for consumption over many days. Many LAN participants will also bring energy drinks and other food to consume over the course of the party.
To set up these parties a network hub/switch isn't always required. If all the computers have Wi-Fi capability, an ad-hoc network may be set up. This allows two or more computers to connect over a wireless connection, thereby eliminating the need for a wired network.
When some of the participants cannot be present or when merging a few LAN parties together, VPN software such as Remobo or Hamachi can be used to arrange computers over the Internet so they appear to be on the same LAN.
This article from : http://en.wikipedia.org/wiki/LAN_party