VoIP means a lot of things to different people. To some it means free phone calls, whilst to others it simply means a different architecture for their office phone system. If you have ever used a low cost carrier to call overseas, you have probably used VoIP without even realized it. If you have ever called AAISP, you have used VoIP as that is the basis for the office phone system. EVen BT are changing the whole UK network so that it works using VoIP.
The way telephones worked originally was that electrical signals were carried along a pair of wires which changed in the same way as the sound waves that make the original sound. This is analogue telephony and has changed little since the phone was first invented. This is the technology that is still used for most telephones and their connection to the local telephone exchange (a few miles of copper wire).
There are however other ways telephone calls can be carried. The main one is using circuit switched digital telephony which basically means the telephone call is digitized, 8000 times a second and the digital information sent as a stream of data. This data may go via copper wires, or fibre optic links, radio links, satellite, and so on. The core telephone network has operated like this for decades, but that is all set to change.
So, a typical phone call from your house to someone else will mean analogue telephone signals in a copper wire from your house to the telephone exchange; digital signals by wire or more likely fibre optic links to another exchange; and finally back to analogue signals from the exchange through copper wires to a real phone.
ISDN (integrated Services Digital Network) is a way to carry the digital signals all the way to your home or office. Most office telephone systems use ISDN, and then either some digital system or an analogue system to carry the calls to the actual phone on your desk.
VoIP is a very simple concept. Basically, it means that the telephone call is digitized, but instead of being sent in a continuous stream of data using dedicated telecommunications links, it is put in to internet protocol (IP) packets. A steam of these packets can then be carried over a data network (ethernet, etc) in the same way as emails and web pages.
Data networks are becoming very fast and very cheap compared to voice technology. For example, a primary rate ISDN line carries 30 calls at a time and is 2Mb (2 mega bits per second). An office network can easily and cheaply use 1000baseT (1 giga bit per second) which is 500 times faster than a primary rate line. Even with 100baseT networking, which is very cheap, you can carry a lot of telephone calls over a data network.
The other point about using a data network is that it is already a global network (called the Internet!) and so it is relatively simple to send these telephone calls anywhere in the world using that network. Compared to the cost of telephone calls, the internet is much cheaper for the amount of data that is used for a telephone call.
The actual technology for VoIP involves several standards and protocols. These are starting to come together and you find more and more than off the shelf equipment and software will just work together. The common protocols are H.323 and SIP, which SIP seemingly taking the lead. There are also protocols used to code and compress the speech to make it take less data.
This is the key to understanding voice over IP. The technology itself it not magic and not that new. What is clever is the way it can be used.
One way is that you can put software on your computer (with headset attached) and another computer somewhere else, connected using internet protocols (i.e. both on the internet) and you can use this to allow you to talk to that other person. This is the point most people think what's the point?. After all you need compatible software at both ends, and headsets, and need to be at your computer which has to be switched on and connected to the internet. There is the one advantage that the call is not costing anything other than the cost of your internet access. Even if you do go to the bother, it is quite possible that every time you do anything on your PC or using your internet connection, the speech breaks up a bit.
Where VoIP gets more interesting is when you have some sort of phone system using it. This could connect to the normal telephone network and to your PC. You could then use your PC to connect the a gateway that then lets you make and receive calls from normal telephones. Of course, the point at which you connect to the normal telephone network, there are normally line charges and call charges, so it is not quite so free any more! Having said this, there are companies that will provide you with a real phone number (which may be the other side of the world even) and charge very reasonable low rates for calls. If you have a US number and are based in the UK, that could be an incentive for people to call you, and also cuts your call costs a lot. We are now providing telephone services allowing to to make and received calls over the internet.
Another way to think about VoIP is to forget the "internet" side of it, and remember that data networks within a large (or even a small) office are relatively cheap. Network switches and cabling are not that expensive, and you have to put them in anyway. If they can carry your telephone calls around your office as well as connect your PCs, then that is a big saving in infrastructure. Within an office, it is much easier to control the quality of service and many network switches have this built in. Of course, there is issue of a headset plugged in to a PC, but this is less of an issue in an office when your PC will be in front of you and switched on anyway.
The next step is the VoIP phone. You can now get a range of VoIP phones, some of which are surprisingly cheap, which connect directly to a network port and handle VoIP calls. Just as with normal analogue phones, you can buy phones with big displays and lots of features for more money. Many VoIP phones have a through connect for the ethernet allowing a PC to plug in to the phone, and a phone in to the office network. This saves in wiring, sockets, switch ports, and makes the cost of the phone comparatively much cheaper than traditional phone systems.
If you have an office phone system that uses VoIP, and you have more than one office - it becomes very simple to link the offices over an internet connection. This can make big savings in call costs.
You can even have a virtual phone system where your phones on desks are VoIP phones connecting via the office network to the internet, and then to a central telephone system that is not even in the office, but in a data centre somewhere.
VoIP is ideal for home workers as well, as a simple broadband internet connection at home allows them to have an office phone at home.
Call quality is one of the concerns people have with VoIP. With traditional telephony, when a call is made, capacity for that call is reserved and allocated just for that call. If there is not enough capacity then you get network busy. Once you have the capacity then you keep it until the call ends. That means you can be sure the stream of data for the call gets from one end to the other without problems that could affect the quality.
With data network such as IP, you send a packet and hope it gets to the other end. If things get busy then a packet will be discarded and not get to the other end. With protocols used for things like email and web pages, this means that the dropped packet is sent again, and over all things get slower when network links get busy. You can't make a phone call go slower though!
This means you can drop packets in your call, and that means blips and silence in the call degrading the quality. The other issue is that there are compressions systems used. Most are quite good, but they can mean the call is not as clear as it would normally be. GSM (as used by mobile phones) is one of the types of compression used. Compression is usually a good thing as it means less data is used to carry the call, and so the network will be less busy and drop fewer packets. Some codec like GSM can also fill in short gaps if a packet is dropped so that the call does not have pops and clicks in it.
Within an office, you can get network switches that know not to drop the important packets in a VoIP call. This means you can deploy VoIP in an office network as the phone system with high quality calls and still benefit from all of the savings in infrastructure.
When sending calls over the internet, the bottleneck that normally affects you is where your network joins the internet. To get around this you need equipment that can managed the queue of data in to and from the internet and give priority to the VoIP traffic. The FireBrick has traffic shaping options which do an excellent job and controlling the traffic.
When properly set up, intra and inter office communications can operate seamlessly with VoIP links saving a lot on telephone calls and infrastructure costs.
You should be reassured that when set up correctly VoIP is as good as normal telephone calls. The fact that BT are changing the whole of the UK network to use VoIP over the next few years is some indication that the technology is mature enough for large scale deployment.