As the name implies, VoIP refers to calls that traverse networks using Internet Protocol (IP). This may mean that the calls are going over the Internet, or it may simply mean that calls are traveling over privately managed data networks that are using IP to transport the calls from one location to the other.
The voice stream is broken down into packets, compressed, and sent toward its final destination by various routes (as opposed to establishing a 'permanent' connection for the duration of the call), depending on the most efficient paths given network congestion.
Today you can compare a VoIP provider’s voice-quality to the traditional circuit-switched technology and find that the VoIP provider’s quality is comparable and often superior. VoIP services and features have also evolved and allow customers many new and exciting options, such as online account management, three-way calling, call forwarding, and extra/virtual numbers.
Many years ago it was discovered that sending a signal to a remote destination could be done in a digital fashion: before sending it we have to digitalize it with an ADC (analog to digital converter), transmit it, and at the end transform it again in analog format with DAC (digital to analog converter) to use it.
VoIP services work in just that manner, digitalizing voice in data packets, sending them, and reconverting them into voice at their destination.
Digital format can be better controlled. We can compress, route, and convert it to a better format, and so on. Also, we saw that a digital signal is more noise tolerant than an analog signal.
TCP/IP networks are made of IP packets containing a header (to control communication) and a payload to transport data. VoIP uses the header to navigate the network to its destination. The payload carries the bits of the conversation.
