Fair warning for telephony gurus - this is basic overview of PBX.
What is a PBX?
A PBX connects internal telephones calls and connects outgoing calls to the public network.
PBX stands for Private Branch Exchange and harkens back to the days before cell phones and touch-tone phones - back to the days of real telephone operators. In those dark times, you would connect to a live operator and tell her who you wanted to be connected to. If you were placing a local call, she could connect you right away on her own switchboard. If you were placing a long distance call, she would connect you to a different operator close to the physical location of the place you were calling.
Nowadays this process is taken care of with technology, but the part where the operator makes the decision to connect you locally or to a different operator is the basis of how PBX systems work today. Technically a more modern
example would probably be a subnet, but telephone operators were neat.
The private branch includes all those local numbers. The PBX works to connect those local, or internal, numbers to each other and also connects a local number to a number outside of the private branch.
Why have a PBX?
Organizations generally use a PBX to save money. A PBX system also includes modern bells and whistles that are a part of everyday life, such as call holding, forwarding, and transfers.
It costs a lot of money to have a dedicated telephone line. Organizations will decrease their cost by renting only a couple of telephone lines instead of direct lines for each employee.
For example, assume that your organization has 40 people. Renting 40 telephone lines is an exorbitant amount of money. Instead you take a calculated risk and decide that out of those 40 people, only 10 people at a time are going to be talking on an outside line. You then rent 10 lines from the telephone company and set up your PBX. Each person receives their own telephone with an extension. Those extensions are numbers local to the private branch. The PBX then handles connecting local numbers and connecting local numbers to telephones outside of the private branch.
The PBX handles extensions, directing internal calls to the correct extension, and connecting internal numbers to numbers outside of the private branch on the rented public telephone lines. It manages all calls by establishing, maintaining, and disconnecting connections between numbers and records call metrics.
PBX systems can be rented or purchased, though you are more likely to use IP PBX systems now.