A packet is the carrier of information between two computers (client and server).
The client is you. The server is Battle.Net or whoever the person is you're conncted to.
When you send a packet to the server, this can tell the server that you are doing "x". For example:
f7 28 11 00 01 01 02 20 50 68 33 34 72 21 21 21 00
Packets use hexidecimal. Each 2 numbers represent a "byte".
F7 is merely a packet header, such as the FF in out of game packets.
28 denotes the type of action (In this case, 28 is "Sent to All")
11 00 denotes the length. 17 bytes total in this case.
The next 6 bytes are unknown as of this time of writing.
After that is the text. The text in this case is Ph34r!!!. If you converted the Hexidecimal into ASCI it would read Ph34r!!! (Notice the 3 "21" bytes at the end? Those are "!" marks).
This will send "Ph34r!!!" to All in a Custom Game
In D2 we learnt that Blizzard built in protection so that if the packet seemed illegitimate it would drop you and put you in the "Suspicious Bastard" log.