I am studying up for CCENT, and I'm having some trouble understanding what a basic router does. I understand one of the main functions is to split up broadcast domains. When they say it splits broadcast domains, does that mean it only splits the WAN and the LAN? Can it split broadcast domains on LAN ports as well?
The function of routers is to route traffic between different networks at layer-3. This can be any combination of WAN or LAN ports.
A router strips off, and discards, the layer-2 frames from traffic received on its interfaces. A router will then use the information in the layer-3 packet to switch the packet to the next interface in a path toward the destination. It will then create a new layer-2 frame for any traffic sent out one of its interfaces. That is why it breaks up layer-2 broadcast domains; the layer-2 information doesn't survive when the layer-2 frame comes into the router.
Some routers will allow subinterfaces and can understand and place VLAN tags on the frames. The router could be configured to route between the subinterfaces, allowing layer-3 traffic to be sent between the layer-2 broadcast domains.