Routers communicate over Wi-Fi channels which are similar to television channels. Each channel is given a number which corresponds to a radio frequency. In the United States, channels 1-11 are allowed to be used for Wi-Fi. Europe allows the use of channels 1-13 and Japan uses channels 1-14.
If you live in an area without any neighbors, then you can pretty much use whatever channel you wish and not receive interference. If you happen to be one of the millions living in cities, where most everyone has wireless internet, you will need to figure out which Wi-Fi channel to use. When your Wi-Fi channel overlaps other nearby networks, neither you nor your neighbors get a very good internet connection.
Each of the 14 channels on the frequency band are separated by 5MHz. A Wi-Fi network signal takes up about 20 MHz of bandwidth, so it overlaps with the two channels on either side of it. When you pick a channel for your Wi-Fi network, you're actually picking the center of 5 different channels. So, if I were to choose channel 6 for my Wi-Fi network, I would actually be using channels 4,5,6,7, and 8.
In the U.S. there is only room in the spectrum for three channels that do not overlap each other, channels 1,6, and 11. So if a neighbor decides to start using channel 4 (which really uses channels 2,3,4,5, and 6) they create and receive interference from your channel 6 network. So to get away from their channel interference you would want to get as far away as possible and set up your Wi-Fi network on channel 11.
Since most everyone uses channels 1,6, and 11, some of you may be thinking that it may be better to choose a different channel like channel 3, or 4. The answer to that question is no. When wireless routers partially share bandwidth, they are not able to cooperate very well which causes internet performance to be significantly slower and data may become corrupted. It is much better to completely share a channel with a neighbor than to only partially overlap. Built into our routers is channel sharing software, which allows our routers to be polite with each other and take turns when another network is completely sharing our bandwidth.
When you have several neighbors using different Wi-Fi channels you can choose to set up your network on the channel (1, 6, or 11) that is furthest away from them or the one that is used the least frequently. You should also look at the signal strength of the surrounding Wi-Fi networks and stay away from those that are the strongest.
Some wireless routers have the option of automatically configuring the channel to the one that has the best quality. Automatically configuring the channel is much easier, but you have no control over which channel you are on. Manually setting your channel is obviously more time consuming, but you have complete control over which channel to use. If you have a router that automatically chooses a channel for you, unless you are having trouble with interference, you may want to just let the router take care of it.
While setting up your wireless router, choose a channel that is one of the three non-overlapping channels, either 1,6, or 11. You may want to avoid channel 6 because of it's heavy usage as a default channel. There are tools readily available on the internet to scan your area for the best channel, or you can just use trial and error to find out whether channel 1,6, or 11 works best for your network.