An IP telephone system uses packet-switched Voice over IP (VoIP), or Internet telephony, to transmit telephone calls over the Internet as opposed to the circuit-switched telephony used by the traditional Public Switched Telephone Network (PSTN). Also known as VoIP phone systems, IP telephone systems typically comprise a VoIP private branch exchange (an IP PBX) and desktop VoIP phones (IP Phones) that connect to a VoIP service provider via a Local Area Network (LAN).
One of the key advantages to IP telephone systems is that whereas long-distance calls on a regular phone system can be cost prohibitive, the same calls on an IP phone system are free — there are no fees beyond the cost of Internet access.
Recommended Reading: The Difference Between VoIP and PSTN Systems.
