IP Phones are specifically designed for use with IP telephony which includes Virtual PBX and Business VoIP. The phones convert standard audio into digital format so it can be transmitted over an IP network, including the internet. It also converts incoming signals into standard audio.

An IP phone comes in two forms, either as a hardware handset or a softphone. Most SME businesses choose desktop IP phones for their PBX system requirements. They look like traditional telephone handsets and have been developed to take full advantage of Business VoIP and Hosted PBX technology.