I found this definition about NAT-T interesting and very concise: Nat Traversal also known as UDP encapsulation allows traffic to get to the specified destination when a device does not have a public address. This is usually the case if your ISP is doing NAT, or the external interface of your firewall is connected to a device that has NAT enabled.As well as IPSec providing confidentiality, it also provides authenticity and integrity. Now the problem is when a NAT device does it’s NAT translations, the embedded address of the source computer within the IP payload does not match the source address of the IKE packet as it is replaced by the address of the NAT device. This means breaking the authenticity which will cause the packet by the remote peer to be dropped. So when the NAT device alters the packet, it’s integrity and authentication will fail.Also in some cases depending on the level of encryption, the payload and in particular the headers are encrypted when using IPSec ESP mode. The NAT device can not change these encrypted headers to its own addresses, or do anything with them.The NAT device in the middle breaks the authenticity, integrity and in some cases can not do anything at all with the packet. It is clear NAT and IPSec are incompatible with each other, and to resolve this NAT Traversal was developed. NAT Traversal adds a UDP header which encapsulates the IPSec ESP header. As this new UDP wrapper is NOT encrypted and is treated as just like a normal UDP packet, the NAT device can make the required changes and process the message, which would now circumvent the above problems. Also enabling Nat-Traversal on the gateways resolves the problem with the authenticity and integrity checks as well, as they are now aware of these changes.During phase 1, if NAT Traversal is used, one or both peer’s identify to each other that they are using NAT Traversal, then the IKE negotiations switch to using UDP port 4500. After this the data is sent and handled using IPSec over UDP, which is effectively NAT Traversal. The receiving peer first unwraps the IPSec packet from its UDP wrapper (the NAT Traversal part that occurred at the sending peer end) and then processes the traffic as a standard IPSec packet.Three ports in particular must be open on the device that is doing NAT for your VPN to work correctly. These are UDP port 4500 (used for NAT traversal), UDP port 500 (used for IKE) and IP protocol 50 (ESP).