From VTwiki

What is VoIP?

VoIP stands for Voice Over Internet Protocol. It uses your high speed internet connection to make and receive phone calls. The main advantage of VoIP is its ability to call anywhere in the world at a cheaper cost, but with the same quality as your normal phone service.  Analog signals are converted into digital information which is then sent across the internet to a local exchange carrier where the digital signal is converted back into an analog signal to be delivered through the public switched telephone network.

 

Most VoIP providers utilize an analog telephone adapter or ATA.  This ATA connects with your existing analog telephones and converts the analog signal into the digital signal which will be sent over the internet.  It also converts the incoming digital signal back to an analog signal which can be heard through your phone.