Explanation
The localhost interface, also known as the loopback interface, is a virtual network interface that allows a host to communicate with itself. It has the IP address 127.0.0.1 for IPv4 and ::1 for IPv6. Some applications use the localhost interface to communicate with other applications running on the same host, such as database servers, web servers, or inter-process communication. Therefore, when the default policy for the netfilter INPUT chain is set to DROP, which means that all incoming packets that do not match any rule are dropped, a rule allowing traffic to localhost should exist to avoid breaking these applications. The rule can be something like this:
iptables -A INPUT -i lo -j ACCEPT
This rule appends a new rule to the INPUT chain that accepts any packet that comes from the loopback interface (lo). The other options are incorrect for the following reasons:
A). All traffic to localhost must always be allowed. This is false because there may be situations where traffic to localhost should be restricted or filtered, such as for security or performance reasons. For example, some malware may try to exploit vulnerabilities in applications listening on localhost, or some applications may generate excessive traffic on localhost that affects the system resources. Therefore, allowing all traffic to localhost is not always necessary or desirable.
B). It doesn't matter; netfilter never affects packets addressed to localhost. This is false because netfilter does affect packets addressed to localhost, unless they are explicitly allowed by a rule or the default policy. Netfilter processes all packets that enter or leave the network stack, regardless of their source or destination address. Therefore, packets addressed to localhost are subject to the same rules and policies as packets addressed to any other host.
D). syslogd receives messages on localhost. This is false because syslogd does not necessarily receive messages on localhost. Syslogd is a daemon that handles system logging, and it can receive messages from various sources, such as local processes, files, pipes, or remote hosts. Syslogd can be configured to listen on a network socket, such as UDP port 514, but it does not have to listen on localhost. Therefore, allowing traffic to localhost is not required for syslogd to function properly.
E). The iptables command communicates with the netfilter management daemon netfilterd on localhost to create and change packet filter rules. This is false because there is no such daemon as netfilterd, and the iptables command does not communicate with any daemon on localhost to create and change packet filter rules. The iptables command is a user-space tool that interacts directly with the netfilter kernel module through the netlink socket. Therefore, allowing traffic to localhost is not needed for the iptables command to work.
References: LPIC-2 202 exam objectives, LPIC-2 202-450 Exam Prep: Network Configuration, Netfilter - Wikipedia, Iptables Essentials: Common Firewall Rules and Commands