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A VPN provides a secure way to access network resources over the Internet or other public or private networks and allows you to connect to a remote network and become a node on that network. VPNs use tunneling, encryption, authentication, and access control over a public network at the same time for security.
Although they often use public networks, VPNs inherit the characteristics of a private network, thus the "Virtual" Private Network.
A VPN can be a better alternative to traditional dial-up connections to provide access to remote users and telecommuters. It can also take the place of the public switched telephone network or dedicated leased lines to connect LANs in different sites. VPNs can also be used to give customers, clients and consultants access to corporate resources.
LinkSys has an informative VPN explanation here: What is VOIP?