VOIP is short for "Voice Over Internet Protocol" and is used in conjunction with IP (Internet Protocol) Telephony, Internet telephony, and Broadband Phone. This procedure is implemented while routing of voice conversations over Internet. A VOIP telephone call is made by using a computer. Voice data gets transmitted through Internet, instead of normal telephone transmission lines. Voice over IP system can also be used on Local Area Networks.

VOIP telephony service is not as efficient as compared to conventional telephone service providers. Conventional telephones use dedicated transmission lines to carry telephone signals, while Internet is constantly carrying all kinds of data. It simultaneously transfers voice data too. Internet connections usually have greatly different upstream and downstream data flow rates. This could result in significant reduction in voice data flow rate and consequently, voice quality.

VOIP to VOIP phone calls are usually free, regardless of the service provider. If a person calls from a VOIP system to a conventional landline or GSM mobile telephone, then the caller may have to pay the charges.

Two types of "non-internet based" to VOIP communication systems in use today are DID or Direct Inward Dialing and "access numbers". DID system works by making direct connection between caller and VOIP user. However, the "access numbers" system requires callers to input extension number of the VOIP user. Access numbers are usually charged as a local call to callers and free to VOIP users. A DID usually has a monthly fee. There are also DID systems which allow free use at the VOIP end but the charges are paid by the caller.

Phone services when implemented via VOIP, are virtually free or cost much less compared to conventional telephone service providers. Cost savings mainly result from use of a single network to carry voice and data. When users have required network capacity, they can use VOIP at no additional cost.