Maximum Transmission Unit, MTU

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A maximum transmission unit (MTU) is the largest size packet, including IP headers, TCP headers and the data segment, that can be sent over the Internet. When determining the maximum size of each packet, TCP uses MTU. If the MTU is set too large, and the traffic passes a router that cannot handle the large MTU, the packets are split up, or fragmented, into smaller packets with a smaller MTU, effectivly lowering your speed.

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If the MTU is too small it means a large overhead of both IP and TCP headers, and acknowledgement packets sent, which will also slow down the traffic.

What is the optimal value for MTU?
In Windows 95 the default MTU was set to 1500 octets, or eight bit bytes. This also happens to be the Ethernet standard MTU. In Windows 98 the default MTU was changed to 576.
Windows uses something called path MTU discovery which automatically negotiates the optimal MTU for each TCP session. MTU discovery will stop fragmentation from occuring. However, negotiation always adjusts downwards, never upwards.

Recommended values for MTU
576 - Dialup
1492 - PPPoE broadband
1500 - Ethernet, DSL and Cable

Setting the MTU manually
Using Regedit, open the key

Tcpip\Parameters\Interfaces\[Adapter ID]]
The value name is MTU and the type is a REG_DWORD.
After you've made changes to the registry, you need to restart your computer for the changes to be applied.

Related tuning
Tuning the TCP receive window size.