Nares are the openings to a fish's olfactory organs—in other words, his nose (or noses—there's one on each side of his face). This organ isn't exactly the same as a human's nose, but it senses smells in the water. Understanding these smells help fish decide what to do, such as swim away in fear or rush forward to grab a tasty bite.
How Nares Work
Olfactory chambers are lined with sensory pads that help fish distinguish different chemical compositions in the water. As water flows through the nares and over the pads, the pads send signals to the brain to help determine information on the smell such as distance and source. Some fish are better smellers than others. Salmon, for example, use their nares to find their way back to the stream where they were born so they can spawn.
Nares are different from mammal nostrils in one important way: fish don't use nares to breathe. Most fish use their gills underwater exclusively to breathe, although some can use their mouths to breathe air from above the water's surface on occasion. Nares are used solely for smelling purposes, and they don't help the fish in respiration. Each olfactory chamber is "blind," meaning it isn't connected to anything else in the fish's body the way the nose is connected to the mouth and throat in humans.
To Swim or Not to Swim
To move water through the nares, fish can swim or use tiny hairs called cilia. In fish with two nares on each side, water flows into one nare, through the sensory pad cavity and back out the other nare, creating a continuous flow so the fish doesn't miss important scents. When fish swim, their motion naturally draws water in for smelling. Not all fish have cilia in their olfactory chambers, but those that do can smell while sitting still. The small hairs draw water into one nare while the fish isn't moving forward, and the cilia in the other nare push the water back out.
The brain interprets the information brought in by the nares and turns it into action. Fish release chemicals into the water to notify other fish of their status, such as when they are wounded. These smells cause different fish to react differently. For example, a shark might zoom toward the smell of a wounded fish, while other fish might take off in the other direction to avoid any threat.