The physical layer describes the mechanical and electrical connections between systems. This includes the media used to transmit the data (cables or wireless), topologies (the way computers are connected to the network) and the bit patterns on the physical cable.
Comparing a network to a railroad, the physical layer would be the rails, ties, stations, switches and so on. It is concerned with things which are, well, physical. The network cards, wire, concentrators, hubs and so on.
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