An offshoot of Internet-based phone services like Vonage, the new Skype software allows personal computer users with broadband connections to make free calls between system users or for pennies a minute to connect to conventional land-line phones and cellular devices.

If you recall the music file-sharing wars a few years ago, you'll better understand how Skype works. Skype's developers claim voice files are transferred between computers the same way millions of people traded songs on Kazaa, Grokster or the original Napster site. But unlike old file-sharing systems, Skype automatically encrypts voice files before sending them through the Internet. Likewise, on arrival everything is decrypted on-the-spot and presented as crystal clear speak, text or a file transfer nobody can intercept, the company says.

An interesting feature of the Skype system: Their site features a global user directory amounting to a giant phonebook of all the people who use Skype as well as an instant messaging system. Another advantage is Skype's ability to share voice files with users regardless what software platform they use (Mac OS 10, Linux, Pocket PC or Windows).

For those wanting to using their computers to call mobile phones or land-based phone numbers, the company also offers the SkypeOut plan that allows users to call anywhere in the world for what amounts to local phone rates.

Company founders claim to have 2 million Skype users in the United States, and more than 13 million worldwide. And, if you're worried about Skype getting overloaded, think again: More than a half-million users are typically connected at any time and the networks has handled more than 1 million simultaneous users.

Engadget November 8, 2004