What other kind of firewall is there? Its just a question of how you filter the packets: based on source/dest IP, if TCP/UDP then port, if ICMP then message type, and you can build on top of TCP/UDP by doing deep packet inspection or do about every type of filtering and inspection known to man like project honeypot does.

Either way install linux and learn iptables. I recommend ubuntu.

It depends, you can even filter the inbound traffic coming from external network(Internet) to your local network or vice versa.

Just search on internet and you will get some tips and guidance on how to construct a firewall.

I recommend starting out with packet capturing on TCP/IP and UDP protocols.

It would be better to first understand the basic of OSI layer and how things work in various levels..
Later i guess u gotto know about NIDS and NIPS systems (network intrusion detection / prevention systems ) . and finally jump over to something complex as firewall.