A number of people have asked me how you can make calls over the Internet using services such as Skype. The technology behind Internet calling is called voice over Internet protocol, or VOIP. Sometimes you'll also hear it referred to as Internet telephony or digital phone. Basically, instead of just transmitting data over the Internet, now with VOIP, you can transmit voice conversations as well, as you can with a regular phone.
The way data is transmitted over the Internet is that is it chopped up into small units called packets. On the Internet, packet "switching" allows more than one connection to share the same amount of space (bandwidth). The packets are then reassembled at the other end of the connection, so you see a Web page, receive an email, or hear a voice. This technology is in contrast to regular phones, which historically have used circuit switching to create a dedicated connection between two people. The appeal of VOIP is that often it's a lot less expensive to talk to friends in far away places than it used to be using Ma Bell.
In the past, Internet connections were too slow to transmit voice data without terrible delays. Years ago, I tested out a very early Internet phone and the lag time and other audio oddities made you feel like you were talking on Edison-era telephones. It definitely wasn't an easy way to communicate. However, over time, the technology has advanced. Now that so many people have high-speed broadband connections, VOIP is coming into its own.
The good news is that Skype can work well if you have a headset and a good connection. The bad news is that if you have a dial-up or satellite connection, you can pretty much forget about VOIP. Dial up is just too slow and satellite has the problem of latency. All those little packets have to travel all the way up to the satellite and then back down, and it's a long way. You end up with the weird delays like I had on the early phones, so it's not even worth bothering.
However, with the right equipment and connection, many people are enjoying lower phone bills. With some VOIP services, you can make local calls no matter where you are. However most people agree that you probably shouldn't give up your landline completely yet. For one thing, an analog phone doesn't require power to operate. If there's a power outage you can still call out. VOIP connections require broadband modems and other equipment that require household electricity, leaving you sitting in the dark with no one to talk to (well, unless you have a cell phone, of course).