I think you can simplify it a bit more:

iptables -F

iptables -P INPUT DROP
iptables -P OUTPUT DROP
iptables -P FORWARD DROP

iptables -A INPUT -i lo -j ACCEPT #You really need this
iptables -A INPUT -m state --state ESTABLISHED,RELATED -j ACCEPT

iptables -A OUTPUT -m state --state NEW,ESTBLISHED,RELATED -j ACCEPT


Now there is a LOT that this firewall doesn't do. If your interested, check out


this thread where markus1982 shows his firewall and gets into some detail about it. Very good reading.

i suppose somebody will eventually find this and get a shock, like i did(no firewall?!!!). so i checked the standalone firewall in /etc/ppp. rp-pppoe3.6 in slackware 10.2 uses iptables, i have no idea what the rules mean, but i'll post what weres(yes, weres) found.
the standalone firewall definitions:
# Interface to Internet
EXTIF=ppp+

iptables -P INPUT ACCEPT
iptables -P OUTPUT ACCEPT
iptables -P FORWARD DROP

iptables -F FORWARD
iptables -F INPUT
iptables -F OUTPUT

# Deny TCP and UDP packets to privileged ports
iptables -A INPUT -p udp -i $EXTIF --dport 0:1023 -j LOG
iptables -A INPUT -p udp -i $EXTIF --dport 0:1023 -j LOG
iptables -A INPUT -p udp -i $EXTIF --dport 0:1023 -j DROP
iptables -A INPUT -p udp -i $EXTIF --dport 0:1023 -j DROP

# Deny TCP connection attempts
iptables -A INPUT -i $EXTIF -p tcp --syn -j LOG
iptables -A INPUT -i $EXTIF -p tcp --syn -j DROP

# Deny ICMP echo-requests
iptables -A INPUT -i $EXTIF -p icmp --icmp-type echo-request -j DROP
the result of iptables -L:
Chain INPUT (policy ACCEPT)
target prot opt source destination
LOG udp -- anywhere anywhere udp dpts:0:1023 LOG level warning
LOG udp -- anywhere anywhere udp dpts:0:1023 LOG level warning
DROP udp -- anywhere anywhere udp dpts:0:1023
DROP udp -- anywhere anywhere udp dpts:0:1023
LOG tcp -- anywhere anywhere tcp flags:FIN,SYN,RST,ACK/SYN LOG level warning
DROP tcp -- anywhere anywhere tcp flags:FIN,SYN,RST,ACK/SYN
DROP icmp -- anywhere anywhere icmp echo-request

Chain FORWARD (policy DROP)
target prot opt source destination

Chain OUTPUT (policy ACCEPT)
target prot opt source destination
i figure that since it shows accept for log and drop that it's not as unsafe as it could be.