A Secure Shell (SSH) tunnel consists of an encrypted tunnel created through a SSH protocol connection. Users may set up SSH tunnels to transfer unencrypted traffic over a network through an encrypted channel. For example, Windows machines can share files using the Server Message Block (SMB) protocol, a non-encrypted protocol. If one were to mount a Microsoft Windows file-system remotely through the Internet, someone snooping on the connection could see transferred files. To mount the Windows file-system securely, one can establish an SSH tunnel that routes all SMB traffic to the remote fileserver through an encrypted channel. Even though the SMB protocol itself contains no encryption, the encrypted SSH channel through which it travels offers security.
To set up an SSH tunnel, one configures an SSH client to forward a specified local port to a port on the remote machine. Once the SSH tunnel has been established, the user can connect to the specified local port to access the network service. The local port need not have the same port number as the remote port.
SSH tunnels provide a means to bypass firewalls that prohibit certain Internet services — so long as a site allows outgoing connections. For example, an organization may prohibit a user from accessing Internet web pages (port 80) directly without passing through the organization’s proxy filter (which provides the organization with a means of monitoring and controlling what the user sees through the web). But users may not wish to have their web traffic monitored or blocked by the organization’s proxy filter. If users can connect to an external SSH server, they can create an SSH tunnel to forward a given port on their local machine to port 80 on a remote web-server. To access the remote web-server users would point their browser to the local port at http://localhost/.
Some SSH clients support dynamic port forwarding that allows the user to create a SOCKS 4/5 proxy. In this case users can configure their applications to use their local SOCKS proxy server. This gives more flexibility than creating an SSH tunnel to a single port as previously described. SOCKS can free the user from the limitations of connecting only to a predefined remote port and server.
Tunneling to circumvent firewall policy
Users can also use tunneling to “sneak through” a firewall, using a protocol that the firewall would normally block, but “wrapped” inside a protocol that the firewall does not block, such as HTTP. If the firewall policy does not specifically exclude this kind of “wrapping”, this trick can function to get around the intended firewall policy.
Another HTTP-based tunneling method uses the HTTP CONNECT method/command. A client issues the HTTP CONNECT command to a HTTP proxy. The proxy then makes a TCP connection to a particular server:port, and relays data between that server:port and the client connection. Because this creates a security hole, CONNECT-capable HTTP proxies commonly restrict access to the CONNECT method. The proxy allows access only to a whitelist of specific authorized servers.
More concrete info on LifeHacker.