When the Internet is used for communications by voice, facsimile, or video conferencing the process is called Internet telephony. Known as voice over the Internet VoI or voice over IP, VoIP, in this system, sound is converted into digital packets that are then transmitted over the internet to the receiver where it is once again converted into sound or text.

All one needs is a multimedia computer, a high speed Internet connection, a sound card, speakers, and a microphone. Since it reduces telecommunication costs significantly, many individuals and businesses are adopting this system. The charges of internet telephony are not dependant on the distance but just a flat fixed rate for use of bandwidth. The only thing is that both you and the person you are calling will need to have the same or compatible software.

First introduced in 1995 the PC-to-PC telephony is set to grow from US$ 1.96 billion in 2003 to US$9.08 billion in 2007. Industry experts predict that over half the phone traffic in the world will be based on IP protocol.

To use the VoIP system, all you need is a regular phone, an adapter, broadband Internet service, and a subscription to a VoIP service. All your offices on a LAN or WAN can benefit from a common phone system with extension dialing, seamless call transfers, voice mail, caller ID, conference calls, music-on-hold, free phone calls, as well as ability to transfer data.

Even while making or receiving calls, you can surf the web or use other web based applications. You will also be able to retain your existing PSTN phone number if the provider you use has this facility. A VoIP provider is a telecommunications company that will handle the technical aspects of the calls and provide the interconnection between VoIP and PSTN networks. Internal calls are transmitted as data on your company network while external calls are transmitted through the network to a gateway which in turn connects to a public telephone network.

The advantages of Internet telephony are numerous the first being cost effectiveness. With a high speed internet connection phone calls can be made all over the world for almost free. By signing up with a VoIP provider you can get unlimited calls within the country at very low costs. The system is portable and you can take the headset or internet phone along with you when traveling. When plugged in to an internet connection anywhere in the world you can both make and receive calls at no extra costs. Wonderful features like call waiting, call forwarding, voice mail, caller ID, and three way calling are all included with the Internet telephone connection at no extra cost.

The system is flexible and you will be able to send documents as well as pictures over the system while you are talking on the phone. The problems you are likely to encounter are: inability to call emergency services, loss of service during power outages, problems with clarity of sound, and scrambling of data. These are however being addressed on a war footing and problems small or big should be ironed out quickly.

VoIP is all set to be the industry standard for telephone communication in the future and is all set to change communications forever.