Layer 3, or L3, switches forward packets based on Layer 3 address, which is IP address. Layer 2, or L2, switches forward packets based on data-link layer, which is MAC address. An L3 switch is basically used to efficiently route inter-VLAN traffic or to do internal routing between multiple broadcast domains while keeping Layer 2 features such as spanning tree and trunking.
Hope this helps.
Agreed – Think of layer 3 switches as switches that have a routing function embeeded within themselves…