What is Iptables?

Iptables is the userspace application to handle packet filtering in the 2.4 Linux kernel.
The kernel subsystem for actually filtering the packets is called Netfilter.
Netfilter & iptables are a complete rewrite of previous packet filtering implementations including ipchains (Linux 2.2) and ipfwadm (Linux 2.0).
Netfilter provides a raw framework for manipulating packets of all types as they traverse through various parts of the kernel.

Iptables is the userspace application to handle packet filtering in the 2.4 Linux kernel.