VoIP is the the rearranging of voice conversations into data transmissions over the Internet or network.
There have been a whole new subsector created within the IT industry as a result of the introduction of VoIP.
For a simple explanation please visit How Stuff Works - How Voip works
VoIP can facilitate tasks that may be more difficult to achieve using traditional networks that have been typically used historically:
Because UDP does not provide a mechanism to ensure that data packets are delivered in sequential order, or provide Quality of Service (known as QoS) guarantees, VoIP implementations face problems dealing with latency and jitter. This is especially true when satellite circuits are involved, due to long round trip propagation delay (400 milliseconds to 600 milliseconds for geostationary satellite). The receiving node must restructure IP packets that may be out of order, delayed or missing, while ensuring that the audio stream maintains a proper time consistency. This functionality is usually accomplished by means of a jitter buffer.
Another challenge is routing VoIP traffic through firewalls and address translators. Private Session Border Controllers are used along with firewalls to enableVoIP calls to and from a protected enterprise network. Skype uses a proprietary protocol to route calls through other Skype peers on the network, allowing it to traverse symmetric NATs and firewalls. Other methods to traverse firewalls involve using protocols such as STUN or ICE.
Fixed delays cannot be controlled but some delays can be minimized by marking voice packets as being delay-sensitive (see, for example, Diffserv).
The principal cause of packet loss is congestion, which can be controlled by congestion management and avoidance. Carrier VoIP networks avoid congestion by means of teletraffic engineering.
Variation in delay is called jitter. The effects of jitter can be mitigated by storing voice packets in a buffer (called a play-out buffer) upon arrival, before playing them out. This avoids a condition known as buffer underrun, in which the playout process runs out of voice data to play because the next voice packet has not yet arrived, but increases delay by the length of the buffer.
Common causes of echo include impedance mismatches in analog circuitry, and acoustic coupling of the transmit and receive signal at the receiving end.
Conventional phones are connected directly to telephone company phone lines, which in the event of a power failure are kept functioning by back-up generators or batteries located at the telephone exchange.
However, household VoIP hardware uses broadband modems and other equipment powered by household electricity, which may be subject to outages in the absence of a uninterruptible power supply or generator. Early adopters of VoIP may also be users of other phone equipment, such as PBX and cordless phone bases, that rely on power not provided by the telephone company.
Even with local power still available, the broadband carrier itself may experience outages as well. While the PSTN has been matured over decades and is typically extremely reliable, most broadband networks are less than 10 years old, and even the best are still subject to intermittent outages. Furthermore, consumer network technologies such as cable and DSL often are not subject to the same restoration service levels as the PSTN or business technologies such as T-1 connection