An IP phone uses Voice over IP technologies allowing telephone calls to be made over an IP network such as the internet instead of the ordinary PSTN system. Calls can traverse the Internet, or a private IP Network such as a that of a company. The phones use protocols such as Session Initiation Protocol, Skinny Client Control Protocol or one of various proprietary protocols such as that used by Skype. IP phones can be simple software-based Softphones or purpose-built hardware devices that appear much like an ordinary telephone or a cordless phone. There also exist the possibility to reuse ordinary PSTN phones as IP phones, with analog telephony adapters (ATA). One of the primary motivations for implementing such a system is the lower calling cost. When calling other IP phones over the internet one only pays for the usually fixed cost internet bandwidth.

It may have many features an analog phone doesn't support, such as e-mail-like IDs for contacts that may be easier to remember than names or phone numbers.

Elements of an IP phone

1. Hardware
2. DNS client
3. STUN client
4. DHCP client (not commonly used)
5. Signalling stack (SIP, H323, Skinny, Skype, or others)
6. RTP Stack
7. User interface

Hardware of a stand alone IP phone

The overall hardware may look like a telephone or mobile phone. An IP phone has the following hardware components.

• Speaker/ear phone and microphone
• Key pad / touch pad to enter phone number and text (not used for ATAs).
• Display hardware to feedback user input and show caller-id/messages (not used for ATAs).
• General purpose processor (GPP) to process application messages.
• A voice engine or a Digital signal processor to process RTP messages. Some IC manufacturers provides GPP and DSP in single chip.
• ADC and DAC converters: To convert voice to digital data and vice versa.
• Ethernet or wireless network hardware to send and receive messages on data network.
• Power source might be a battery or DC source. Some IP phones receive electricity from Power over ethernet.

Other devices

There are several WiFi enabled mobile phones and PDAs that come pre-loaded with SIP clients or are at least capable of running IP telephony clients. Some IP phones may also support PSTN phone lines directly.

Analog telephony adapters

These are usually rectangular boxes that are connected to the internet or Local area network using an Ethernet port and have sockets to connect one or more PSTN phones. Such devices are sent out to customers who sign up with various commercial VoIP providers allowing them to continue using their existing PSTN based telephones.

Another type of gateway device acts as a simple GSM base station and regular mobile phones can connect to this and make VoIP calls. While a license is required to run one of these in most countries these can be useful on ships or remote areas where a low-powered gateway transmitting on unused frequencies is likely to go unnoticed.