The letters VOIP stand for Voice Over Internet Protocol, a means of telephony carried over TCP/IP (internet connections). Users need client software (such as Skype), a computer and either a handset or headset which is usually plugged into a USB port.
People are starting to become familiar with Skype, which offers direct duplex (telephone like)communication between different Skype users at no charge, or calls to landline numbers at a competitive rate. Sype is a P2P based ervice, and as such, quality sometimes suffers when user numbers are at a peak.
Alternative services are springing up, such as the strangely named but highly effective VOIPStunt. This service even allows a direct call to be made between two landlines, with superior quality. Calls to landline users in many countries are actually free to subscribers.