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The mkfifo, or Make First-In First-Out, command creates a form of 'pipe' somewhere on the file system with special properties. This pipe can be thought of as a file in the traditional, or physical, sense in that it can be written-to and read-from however it takes it one step further by allowing two separate process to have access to it; one process writes to it while another process reads from it and in the order entries were made. As such it is often referred to as 'half-duplex' because only one write or one read can happen at a time. This makes it a form of 'data buffer'.
In reality the 'fifo' pipe exists in memory. It is a form of virtual link, similar to file system entry created by the link command. As such it is limited by available system memory. That said the pipe is persistent and will survive a reboot but the data within it will not, the fifo entry remains in place until it is removed by issuing a remove command.