@farmerman,
VOIP stands for Voice Over Internet Protocol. Basically, it means internet telephony. The main advantages of it are that the old world telephone networks charge much higher prices than you could get for the same data over internet protocols.
Vonage is one of the most famous providers of this kind of service, Skype is too, but they are more famous for a free offering they have that just works with other skype members (voice chat).
So most people use skype in the same way they'd use an IM (instant messaging) program like AIM, ICQ, MSN Messenger, or Yahoo. They can text chat other skype members, and even do voice and video calls. Most other IM offerings can do the same, but Skype also lets you pay very low rates (cents a minute) for skype to phone calls and phone to skype calls.
So I use it on an actual desktop phone, that's plugged into the internet. But you can try it free with other skype members (it only costs money to call regular phone numbers or to receive calls from phones).