Voice over IP (VoIP) is a family of technologies, methodologies, communication protocols, and transmission techniques for the delivery of voice communications and multimedia sessions over Internet Protocol (IP) networks, such as the Internet. Other terms frequently encountered and often used synonymously with VoIP are IP telephony, Internet telephony, voice over broadband (VoBB), broadband telephony, and broadband phone.
Internet telephony refers to communications services—Voice, fax, SMS, and/or voice-messaging applications—that are transported via the Internet, rather than the public switched telephone network (PSTN). The steps involved in originating a VoIP telephone call are signaling and media channel setup, digitization of the analog voice signal, encoding, packetization, and transmission as Internet Protocol (IP) packets over a packet-switched network. On the receiving side, similar steps (usually in the reverse order) such as reception of the IP packets, decoding of the packets and digital-to-analog conversion reproduce the original voice stream. Even though IP Telephony and VoIP are terms that are used interchangeably, they are actually different; IP telephony has to do with digital telephony systems that use IP protocols for voice communication while VoIP is actually a subset of IP Telephony. VoIP is a technology used by IP telephony as a means of transporting phone calls.
VoIP systems employ session control protocols to control the set-up and tear-down of calls as well as audio codecs which encode speech allowing transmission over an IP network as digital audio via an audio stream. The choice of codec varies between different implementations of VoIP depending on application requirements and network bandwidth; some implementations rely on narrowband and compressed speech, while others support high fidelity stereo codecs.
VoIP is available on many smartphones and Internet devices so that users of portable devices that are not phones may place calls or send SMS text messages over 3G or Wi-Fi.(source, Wikipedia)