I created a Bukkit server using my internal ip address, and my friend and I could play together when he was at my house. But I realized that for us to play together when we're not at my house, I need to make the server use my external ip address. Is there anyway to perform this switch and how do I do it? Does it involve port-fowarding and the like?
People connected to your home network, ie same router, use the internal IP to connect, no port forwarding needed. For someone outside your network to connect, they need to type in your external IP, found at http://www.whatismyip.com/. This does need port forwarding.
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Advanced Guide to server-ip and server-port settings.