Voice over IP (Internet Protocol) is a method of carrying voice conversations over the Internet. The sound is digitized, broken into packets, and sent using the same process by which your Web browser asks for and receives Web pages a chunk at a time. With sufficient network bandwidth, VoIP calls have quite adequate sound quality, but they can suffer considerably if there is much network lag. Thus, VoIP works better over local area networks, and uncongested networks.
To users, VoIP calls are much like voice telephone calls, except that they have almost zero cost. There used to be serious quality issues, and you originally connected from one computer (with speakers and microphone) to another using Internet addressing. Many of these shortcomings have been addressed in several modern VoIP systems.
VoIP software and protocols
There are now commercial VoIP services in developed countries that use ordinary-looking telephone equipment plugged into a wall jack, supporting calls to any conventional or VoIP telephone, again at very low rates for long distance. Almost all new corporate phone systems now use VoIP. On the consumer side, we have several open and proprietary systems. Skype, a proprietary system, offers free software for computer-to-computer calls, and charges modest rates for global computer-to-telephone calls, based not on long-distance rates, but on the local rates at the destination. See Skype to get instructions for running Skype on the XO.
Reasonable hardware for VoIP is built into the laptop, together with wireless mesh networking. Headsets that can plug into the XO's audio ports are also readily available, and would improve the sound quality and the privacy of calls (as compared to using the speakers and microphone). There is no solid working VoIP software for the OLPC yet, though. See IAX for more on possible client and server side software and protocols.
More background ideas
Since each school is intended to get a server and an Internet connection, all of the children who get Laptops will theoretically be able to call each other, subject to the usual constraints on discovering whom it is you really need to talk to. Another big constraint will be the quality and load on the school's Internet connection. The rest of the family should be able to make phone calls some of the time, too.
UN Secretary-General Kofi Annan's Digital Challenge to Silicon Valley some years ago pointed out that VoIP over wireless communications could provide voice communication in developing countries at a small fraction of the cost of a cell phone system, which in turn is a fraction of the cost of copper and fiber optic land lines. In some countries, copper wire is still routinely stolen: dug up from the ground or pulled down from the poles to sell as scrap.
Unfortunately, there are a number of countries, mainly in Africa, where VoIP remains illegal, although there has been and continues to be considerable progress in prying the technologies and markets loose from the previous monopoly telephone companies.
Pointers to possible VoIP software
This OLPCnews forum posting on VoIP software lists the major software that the author has tried for audio, video, and text conferencing on the OLPC; and what the results were.
Ekiga has been tested under os18 with and without headset via a commercial SIP provider (Teliax) and been found to work. Ekiga can be install with 'sudo yum install ekiga'