What is PEAP?
The Protected Extensible Authentication Protocol, also known as Protected EAP or simply PEAP, is a protocol that encapsulates the Extensible Authentication Protocol (EAP) within an encrypted and authenticated Transport Layer Security (TLS) tunnel. The purpose was to correct deficiencies in EAP; EAP assumed a protected communication channel, such as that provided by physical security, so facilities for protection of the EAP conversation were not provided.
PEAP was jointly developed by Cisco Systems, Microsoft, and RSA Security. PEAPv0 was the version included with Microsoft Windows XP and was nominally defined in draft-kamath-pppext-peapv0-00. PEAPv1 and PEAPv2 were defined in different versions of draft-josefsson-pppext-eap-tls-eap. PEAPv1 was defined in draft-josefsson-pppext-eap-tls-eap-00 through draft-josefsson-pppext-eap-tls-eap-05, and PEAPv2 was defined in versions beginning with draft-josefsson-pppext-eap-tls-eap-06.
PEAP is similar in design to EAP-TTLS, requiring only a server-side PKI certificate to create a secure TLS tunnel to protect user authentication, and usesserver-side public key certificates to authenticate the server. It then creates an encrypted TLS tunnel between the client and the authentication server. In most configurations, the keys for this encryption are transported using the server's public key. The ensuing exchange of authentication information inside the tunnel to authenticate the client is then encrypted and user credentials are safe from eavesdropping.
PEAPv0 and PEAPv1 both refer to the outer authentication method and are the mechanisms that create the secure TLS tunnel to protect subsequent authentication transactions. EAP-MSCHAPv2 and EAP-GTC refer to the inner authentication methods which provide user or device authentication. A third authentication method commonly used with PEAP is EAP-SIM.
Within Cisco products, PEAPv0 supports inner EAP methods EAP-MSCHAPv2 and EAP-SIM while PEAPv1 supports inner EAP methods EAP-GTC and EAP-SIM. Since Microsoft only supports PEAPv0 and doesn’t support PEAPv1, Microsoft simply calls it "PEAP" without the v0 or v1 designator. Another difference between Microsoft and Cisco is that Microsoft only supports the EAP-MSCHAPv2 method and not the EAP-SIM method.
However, Microsoft supports another form of PEAPv0 (which Microsoft calls PEAP-EAP-TLS) that many Cisco and other third-party server and client software don’t support. PEAP-EAP-TLS requires client installation of a client-side digital certificate or a more secure smartcard. PEAP-EAP-TLS is very similar in operation to the original EAP-TLS but provides slightly more protection because portions of the client certificate that are unencrypted in EAP-TLS are encrypted in PEAP-EAP-TLS. Ultimately, PEAPv0/EAP-MSCHAPv2 is by far the most prevalent implementation of PEAP, due to the integration of PEAPv0 into Microsoft Windows products. Cisco's CSSC client now supports PEAP-EAP-TLS.
PEAP has been so successful in the market place that even Funk Software (acquired by Juniper Networks in 2005), the inventor and backer of EAP-TTLS, added support for PEAP in their server and client software for wireless networks.
Quote from https://en.wikipedia.org/wiki/Protected_Extensible_Authentication_Protocol