The decrease in signal strength in an optical fiber caused by absorption and scattering. Attenuation can be calculated to express the signal loss between two points, or the total signal loss of a telecommunications system or segment.
1) In Infrastructure mode, the AP is used to relay information between two or more clients. No differentiation is made if the clients are within range of each other or not.
In ADHOC mode (configured on the client), it is possible for clients to talk directly to each other, but this is typically discourage for security reasons.
And yes, if the two clients were next to each other, although they could "hear" each others' transmissions, they do nothing with this information and will wait for the AP to retransmit the message to them - unless the client is running AirSnort ;)
Your observation is interesting, though, because where we usually think of the RF domain as analogous to a wired hub (which is more or less accurate if all devices can detect each other). But the wired hub scenario never had another "master host" retransmitting data back to other clients on the hub.
However, client-to-client transmission tends to be less common in real-world deployments since the RF clients are typically trying to communicate with centralized data servers on the wired network or the Internet.
As some evidence of this, Cisco access points (at least the LWAP versions) have a feature to explicitly disable client-to-client communication for enhanced security. This feature would not be practical if it were not applicable to the way wireless is often utilized.
2) In infrastucture mode, the conversation is between the AP and the client, not client to client regardless of other information transmitted by other clients to the AP.
3) It is my understanding that layer 2 communication takes place between the AP and the client.
4) The AP (BSS) must wait to transmit just like the clients have to.
5) Interesting point. I believe that closer APs can communicate at higher data rates while more distant clients will connect at a lower data rate. That said, the closer client will need to wait for the slower transmission to/from the more distant client to complete before it can get its turn. Therefore, support for slower data rates can negatively impact throughput of closer clients when more distant clients are connected at a lower data rate.
6) I have interpreted Signal Strength to be the raw RF energy that the client is receiving while Signal Quality reflects the data rate and signal to noise ratio. I am not running the client on my machine, but am wondering if the help function adds any insight.
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