Voice Over Internet Protocol (also called VoIP, IP Telephony, Internet telephony, and Digital Phone) is the routing of voice conversations over the Internet or any other IP-based network. The voice data flows over a general-purpose packet-switched network, instead of traditional dedicated, circuit-switched voice transmission lines.
Protocols 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.
Voice over IP traffic may be deployed on any IP network, including ones lacking a connection to the rest of the Internet, for instance on a private building-wide LAN.
In general, phone service via VoIP costs less than equivalent service from traditional sources, mainly due to selling below market costs. There are also some cost savings due to using a single network to carry voice and data. This is especially true when users have existing under-utilized network capacity that they can use for VoIP without any additional costs.
One must note that the maximum upstream in your Internet connection is the final throttle and service is not as good as standard telco services. VoIP phone calls (even international) are widely regarded as free. While there is a cost for their Internet service, using VoIP over this service usually does not involve any extra charges, so the users view the calls as free. There are a number of services that have sprung up to facilitate this type of "free" VoIP call. Examples are Free World Dialup, Skype and TheGlobe.
VoIP makes easy some things that are difficult to impossible with traditional phone networks: Incoming phone calls can be automatically routed to your VoIP phone, irrespective of where you are connected to the network. Take your VoIP phone with you on a trip, and anywhere you connect it to the Internet, you can receive your incoming calls. Call center agents using VoIP phones can work from anywhere with a sufficiently fast Internet connection. VoIP phones can integrate with other services available over the Internet, including sending and receiving messages or data files in parallel with the voice conversation, audio conferencing, managing address books and passing information about whether others (e.g. friends or colleagues) are available online to interested parties.
Telcos and consumers have invested billions of dollars in mobile phone equipment. In developed countries, mobile phones have achieved nearly complete market penetration, and many people are giving up landlines and using mobiles exclusively. Given this situation, it is not entirely clear whether there would be a significant higher demand for VoIP among consumers until either a) public or community wireless networks have similar geographical coverage to cellular networks (thereby enabling mobile VoIP phones, so called WiFi phones) or b) VoIP is implemented over legacy 3G networks. However, "dual mode" handsets, which allow for the seamless handover between a cellular network and a WiFi network, are expected to help VoIP become more popular.