A PBX (Private Branch eXchange) is essentially an automatic switchboard for telephone systems. It provides the same basic functions for any business or enterprise that the ranks of telephone operators with handfuls of wiring plugs did that you will remember seeing in old movies. Those essential features are to provide switching and connection between any two (or more) telephone users and make sure the connection remains in place until it is ended, at which point the system properly terminates the connection.

Any system that does this automatically for telephone calls within an organization is a PBX. The reason businesses move to PBXes is to avoid requiring every employee to have a direct line to the public telephone system, each of which incurs a connection and a line charge. Instead, a smaller number of lines get shared by all the users and managed by the PBX. This saves money and is more efficient.