The voice data flows over a general-purpose packet-switched network, instead of traditional dedicated, circuit-switched voice transmission lines.

Phone calls using VoIP usually do not involve any extra charges (beyond the flat monthly charge for Internet service), so users view their calls as free. Residential and commercial customers can make unlimited calls, thus avoiding service fees and tolls charged by local telcos and long-distance carriers (in the same way a user doesn't pay for sending individual e-mails over the Internet). Not surprisingly, many organizations now use VoIP internally over WAN links to reduce telephony service costs.

Residential VoIP product and service configurations already exist for making and receiving calls via:

• Your desktop computer
• Your laptop while mobile
• Your regular phone at home
• Your cordless phone
• Or by purchasing a specially-designed VoIP telephone

The type of product configuration and service that you choose depends on your individual needs. Once more, here are the options you may want to consider:

• VoIP software if you are happy making and receiving calls only via your PC.
• If you want to make and receive calls through your regular telephone, a VoIP telephone adapter will connect your phone to the Internet via your high-speed modem.
• A VoIP-designed phone automatically connects you to the Internet without the need for an adapter, but may not have features similar to those on your own phone.

Most service providers offer some combination of this equipment free (or included within a first month "Activation Fee" when you sign up).

Besides saving you money on long-distance and international phone calls, VoIP offers the following advanced features:

• Free Calling Features. Many of the telephone features that you ordinarily pay for are free.
• Access Numbers. Get a “virtual presence” in multiple cities with phone numbers for each city area code – all routed to your number.
• Portability. Take it with you when you travel and turn any telephone and high speed Internet connection into your home phone.
• Ring Tones. Make your phone ring with different rings for important callers.
• Priority Callers. Have important callers reach you by forwarding their calls to other phone numbers (e.g. your cell phone).
• Beyond Voicemail. Get voicemail sent to your e-mail inbox as a sound attachment, and listen to it on your PC.

Traditional phone calls work by allocating an entire phone line to each call. With VoIP, voice data is compressed and transmitted over a computer network. This means VoIP uses 90 percent less bandwidth than a traditional telephone call and is consequently much less expensive.

For businesses, VoIP generates immediate bottom-line benefits:

• Cheaper external calls. You can make long-distance and international calls for the price of a local call.
• Free internal calls. With VoIP over a Virtual Private Network (VPN), you can speak free of charge to connected colleagues at different branches.

And there are several other key advantages:

• Simplified infrastructure. With a VoIP-based network, you no longer need separate cabling for your telephone system.
• Scalable. Traditional PABX (Private Automatic Branch Exchange)-based phone systems come in many sizes, so it may be necessary periodically to upgrade existing systems with new hardware. There are no scalability issues with VoIP systems.
• Reduce operating costs. Because a VoIP exchange is based on software rather than hardware, it is easier to alter and maintain.
• Improve productivity. VoIP treats voice as if it were any other kind of data, so users can attach documents to voice messages or participate in virtual meetings using shared data and videoconferencing.
• Flexibility. A Virtual Private Network (VPN) sets aside a specified allocation of bandwidth on the public Internet, with public access prevented through encryption. If your company has its own VPN and combines it with VoIP, you can set up a fully-functioning office anywhere there is a broadband connection.