Packet-switched describes the type of network in which relatively small units of data called packets are routed through a network based on the destination address contained within each packet. Breaking communication down into packets allows the same data path to be shared among many users in the network. This type of communication between sender and receiver is known as connectionless (rather than dedicated). Most traffic over the Internet uses packet switching and the Internet is basically a connectionless network.

Contrasted with packet-switched is circuit-switched, a type of network such as the regular voice telephone network in which the communication circuit (path) for the call is set up and dedicated to the participants in that call. For the duration of the connection, all resources on that circuit are unavailable for other users. Voice calls using the Internet’s packet-switched system are possible. Each end of the conversation is broken down into packets that are reassembled at the other end.

Another type of digital network that uses packet-switching is the X.25 network, a widely-installed commercial wide area network protocol. Internet protocol packets can be carried on an X.25 network. The X.25 network can also support a virtual circuit in which a logical connection is established for two parties on a dedicated basis for some duration. A permanent virtual circuit (PVC) reserves the path on an ongoing basis and is an alternative for corporations to a system of leased lines. A permanent virtual circuit is a dedicated logical connection but the actual physical resources can be shared among multiple logical connections or users.