The OSI model divides network communication into 7 layers, with each layer building on the ones below it. The physical layer is responsible for physical interface and transmission, while the data link layer handles addressing and error checking. The network layer uses logical addressing to determine the best path for packet delivery. Higher layers include the transport layer, which segments data and ensures reliable delivery, as well as the session, presentation and application layers which handle user interactions. The OSI model provides a framework for designing networking hardware and software by standardizing the functions of each layer.