A VPN is a method of connecting to a private network (for example, your office network) by way of a public network (for example, the Internet).
A VPN gives you the benefit of a dial-up connection to a dial-up server, plus the ease and flexibility of an Internet connection.Using an Internet connection permits you to connect to resources all over the world and still, in most places,connect to your office by making a local call to the nearest Internet access  phone number. If you have a high-speed Internet connection such as cable or digital subscriber line (DSL) at your computer and at your office, you can communicate with your office at full Internet speed.This is much faster than any dial-up connection that uses an analog modem.VPNs use authenticated links to make sure that only authorized users can connect to your network, and they use encryption to make sure that others cannot intercept and cannot use data that travels over the Internet. Windows XP achieves this security by using Point-to-Point Tunneling Protocol (PPTP) or Layer Two Tunneling Protocol (L2TP).A Tunneling Protocol is a technology that helps make the transfer of information  over the Internet more secure from one computer to another.
VPN  technology also permits a corporation to connect to its branch offices or to other companies over a public network, such as the Internet, while helping to  maintain secure communications.The VPN connection across the Internet logically  operates as a dedicated wide area network (WAN) link.


Securing a VPN

If you're using a public line to connect to a private network,then you might wonder what makes a virtual private network private? The answer is the manner in which the VPN is designed. A VPN is designed to provides a secure, encrypted tunnel in which to transmit the data between the remote user and the company network. The information transmitted between the two locations via the encrypted tunnel cannot be read by anyone else.

VPN security contains several elements to secure both the company's private network and the outside network, usually the Internet, through which the remote user connects through. The first step to security is usually a firewall. You will have a firewall site between the client (which is the remote users workstation) and the host server, which is the connection point to the private network. The remote user will establish an authenticated connection with the firewall.




Article source:http://support.microsoft.com/kb/314076
Article source: http://www.webopedia.com/TERM/V/VPN.html