Voice over Internet Protocol, also called VoIP, IP Telephony, Internet telephony, Broadband telephony, Broadband Phone and Voice over Broadband is the routing of voice conversations over the Internet or through any other IP-based network.

Companies providing VoIP service are commonly referred to as providers, and protocols which are used to carry voice signals over the IP network are commonly referred to as Voice over IP or VoIP protocols. They may be viewed as commercial realizations of the experimental Network Voice Protocol (1973) invented for the ARPANET providers. Some cost savings are due to utilizing a single network - see attached image[1] - to carry voice and data, especially where users have existing underutilized network capacity that can carry VoIP at no additional cost. VoIP to VoIP phone calls are sometimes free, while VoIP to PSTN may have a cost that's borne by the VoIP user.

There are two types of PSTN to VoIP services: DID (Direct Inward Dialing) and access numbers. DID will connect the caller directly to the VoIP user while access numbers require the caller to input the extension number of the VoIP user. Access numbers are usually charged as a local call to the caller and free to the VoIP user while DID usually has a monthly fee.

VoIP can facilitate tasks that may be more difficult to achieve using traditional networks:
Incoming phone calls can be automatically routed to your VoIP phone, regardless of where you are connected to the network. Take your VoIP phone with you on a trip, and wherever you connect to the Internet, you can receive incoming calls.
Free phone numbers for use with VoIP are available in the USA, UK and other countries from organizations such as VoIP User.
Call center agents using VoIP phones can work from anywhere with a sufficiently fast and stable Internet connection.
Many VoIP packages include PSTN features that most telcos (telecommunication companies) normally charge extra for, or may be unavailable from your local telco, such as 3-way calling, call forwarding, automatic redial, and caller ID.

Quality of Service

Some broadband connections may have less than desirable quality. Where IP packets are lost or delayed at any point in the network between VoIP users, there will be a momentary drop-out of voice. This is more noticeable in highly congested networks and/or where there is long distances and/or interworking between end points. Technology has improved the reliability and voice quality over time and will continue to improve VoIP performance as time goes on.

from : en.wikipedia.org