Many games use peer to peer (P2P) technology. The nature of P2P technology means that your device i.e. Xbox, PlayStation, PC, Switch, etc. needs to act as both a server and a client. Your device also needs to accept connections initiated by other gamers that you are playing with / against. These are connections coming from outside of your network, NAT by default wants to drop these packets.
This is great for security, but a problem when using P2P applications such as many online games. Call of Duty is an example of a popular game that uses P2P technology extensively. NAT by design breaks P2P connections. NAT does not conform to the end to end principle that P2P relies on for reliable communication.
Game developers and engineers use a variety of of techniques to help with NAT traversal. This is why games using P2P technology are able to work at all on networks using NAT. Engineers work hard on designing games to navigate though NAT as best as possible.
The problem is that the nature of NAT will never allow for full end to end communication as P2P technology expects.
What Does NAT Type Mean For Gaming
As you can probably tell by the information above, NAT is a complicated subject. NAT is also a very important subject in reference to gaming because it impacts almost every part of your online gaming experience. “NAT type” is a term widely used within the gaming world.
NAT type is an attempt by manufacturers and game developers to indicate how effectively your gaming system (Xbox One, Xbox Series X / S. PS5, PS4, PC, etc.) is able to communicate with outside connections.
NAT type is displayed within the settings menu of most gaming systems. NAT type is also displayed in many games that rely on P2P technology.
A point of confusion for many gamers is when the NAT type shown in the settings menu does not match the NAT type shown in the game. This happens because they test in a different way and use different ports for communication. The NAT type you see displayed in the game menu is what matters most.
Game developers and console manufacturers do not all use the same definition of NAT type. They also do not always use the same terminology.
The most commonly used terms to describe NAT types are open, moderate, and strict. Different platforms will set different thresholds of what qualifies as open, moderate, and strict. Most often these are the terms used in the gaming industry to describe NAT type.
Double NAT is also a problem that cab affect gaming performance. On Xbox consoles you will often get an error message when double NAT is detected.