VoIP which is pronounced as “voyp”, (as in voice), stands for Voice Over Internet Protocol. It is an alternative to traditional phone network where voice communication is carried over an Internet based infrastructure. VoIP technology converts and encodes speech into digital data that travels via a broadband connection (fiber optic, DSL or cable) to its destination. The destination can be another VoIP client or a traditional phone.
VoIP is usually more cost effective than traditional phone service and includes more features without any additional costs. Some features, such as video conferencing, are much easier and cheaper to implement with a VoIP solution.
In addition to personal computers nowadays VoIP can also run on smart-phones and tablets, making it completely location independent. VoIP solutions are usually software based, not requiring any additional hardware to operate, although in a traditional office setup some clients prefer to invest in telephones that are specifically designed to work over a broadband connection - known as SIP phones.
Scalability is another advantage of VoIP since it does not require major wiring when a company needs to expand its operations. With traditional phone systems, the network has a specific limit for load and number of users. Expanding requires costly infrastructure work. But with VoIP, additional telephones and calling stations are added as simply as installing a new computer - that is merely plugging it to an existing Ethernet port or chain linking it to a nearby computer. This of course also has some limits, but IP infrastructure, by nature and by software optimization, can handle much bigger data loads than traditional phone lines.