From Halopedia, the Halo wiki
System Link is a form of offline multiplayer gaming in which Xbox or Xbox 360 consoles connect to each other over a LAN. System Link allows for multiplayer gameplay on multiple consoles, providing an alternative to split-screen gameplay and supporting far more players in one game.
Halo: Combat Evolved, though a combination of System Link and normal split-screen gameplay, allows up to 16 players to participate in a single match—four consoles, each showing four split screens. Later, post-Xbox Live games such as Halo 2 would support more than four consoles using System Link.
Like the Xbox, the Xbox 360 allows players to play system link via wired Ethernet or a wireless adapter (such as the Xbox 360 Wireless Network Adapter in an access point-based or mesh network). To hook up four Xbox 360's together, one would need special linking adapters. Additionally, some Xbox Live titles like Halo 3 can play a match with players connected over Xbox Live and on the same LAN. By allowing multiplayer games over the same LAN, System Link has led to the formation of private and public LAN parties.