I know that a protocol is a set of rules that governs communication between two computers on a network, but how are thoses rules implemented for the computer? Is a protocol basically a piece of code or, in other words, software?
Protocols are generally built upon each other. At the risk of sounding pedantic, here's an example of a protocol and where/how it's implemented:
In a sense, these are all "protocols" (a set of rules or expected behaviors that allow communication to take place), and they're built on one another.
Bear in mind that (aside from electricity) this is not an exhaustive list of the sort of protocols that exist at any of these layers!
Edit Thanks to dmckee for pointing out that electricity isn't the only physical process used in networking ;)
Networking protocols are not pieces of code or software, they are only a set of rules. When software uses a specific networking protocol, then the software is known as an implementation. There can be many different software implementations of the same protocol (i.e. Windows and UNIX have different TCP/IP implementations). It is possible to understand networking protocols without any knowledge of programming.
EDIT: How are they implemented? Here's a paper on taking an abstract specification of a protocol and implementing it into C. You'll see that less-strict protocols leave out certain details that programmers have to guess on, which makes some implementations incompatible with others.
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