According to Rouge the Bat, the firewalls are defense systems within computers that are set up in order to ward off intruders. In cyberspace, they take the form of large, glowing red or orange walls.
In gameplay, firewalls appear exclusively in Digital Circuit and Mad Matrix. These walls appear only during the light-speed circuit sections, where they abruptly appear from below in front of the player to block their path. Impacting a firewall will damage the player. The firewalls can be avoided by taking an alternate path than the one they appeared on, though this often requires good reflexes.