Transport of telephone calls using conventional telephone devices, computers with multi-media accessories, or dedicated terminals over the Internet are called IP Telephony. It is the most cost effective way of telephoning. Data-oriented and voice-oriented communication has different infrastructures. With the convergence of telecommunication and Internet technologies, multiplexing of data and voice is possible and leads to better bandwidth utilization that has brought down costs.

One of the prominent features of IP telephony is the software-driven functionality. Software solutions are generally extended and integrated with many services and applications. However, the scope for wide market acceptance is still hindered by the fact that the quality of voice over IP is lower than the ones perceived in the conventional Public Switched Telephone Network (PSTN) environment. Packet delay, loss and jitter are the main negative factors. In some countries, it has become subject to government regulations.

IP Telephony usage is dependant on call activating and terminating devices. The call may be PC to PC, PC to telephone, telephone to PC, or telephone to telephone. If you have a PC on either side of a call, it has to be equipped with an audio device. In the case of a telephone, a gateway has to be used to convert a transmission format between Internet and the telephone.

IP Telephony has a promising future for its multi-purpose communication features. Significant efforts have been made towards introducing mobility to IP Telephony for transparent usage of wireless networks and explicit application-level support. With the improvements taking place in its commercial deployment, it is likely to equalize with the traditional telephone systems cost factor.