Internet telephony refers to the science or technology of integrating telephone services into computer networks. In essence, it converts analog voice signals into digital signals, transmits them, then converts them back again. Voice over IP (VoIP) is a common form of this service.
With traditional telephone service, sometimes referred to as POTS (Plain Old Telephone Service), voice signals use telephone lines — copper wires — and circuit switches to communicate. Internet telephony eliminates the telco company all together by using computer networks to send voice signals. All information is transferred across the Internet in "data packets." For example, if someone sends a friend an email, the email is broken up into a series of data packets that each take their own route to the destination mail server. Once there, the packets reassemble themselves into the full email message.
Internet telephony also transmits using data packets. Analog voice signals are digitized, sent in discreet packets to the destination, reassembled and reverted back to analog signals. By using this system, a person can place long-distance calls free of telephone charges. The catch is that both parties must have the correct software. If this technology is used to call a land-line or cell phone, charges apply, though they are usually minimal.
Some online VoIP services provide free Internet telephony software and use a prepaid system to keep monies on account for calling from it to a land line. The charge is a small and made per minute, per call. The rate does not change, whether calling someone local or in another country. Again, if both parties use VoIP software, there is no charge at all.
Internet telephony has drastically improved since its first incarnations. Initial VoIP was very poor quality, but now many users report land line-like quality. There are many advantages to using the Internet to make calls, not just for family members and friends to stay in touch free of charge, but for multi-state or multi-national corporate PBXs where routine long distance calls between offices are significant. A potential disadvantage of using Internet telephony for corporate environments is that VoIP tends to have more downtime than POTS. Computer or network problems can interfere with the calls, though many VoIP programs kick calls to POTS if there is a problem.
Voice mail and other telephone services are often available from these services, and installation of simple VoIP software is easy for anyone with a small amount of skill. Industry insiders predict that, in time, Internet telephony technologies and services will supplant much of the workload currently handled by plain old telephone service.