1. A VPN allows the user to remotely connect to a company, via the Internet, with a secure connection that makes it appear ("virtually") as if the machine is on the corporate LAN. VPNs are used for employee-company and company-company connections. Key point: One way that an employee can connect to a company is to put a modem in the machine and dial directly to modems inside the corporation. This is expensive due to long distance charges. But think for a moment that the employee can purchase two modems to put in the machine, and while dialed up to the corporation, the employee also dials up the Internet. This would mean that the employee has two active network connections: one to the corporation, one to the Internet. A VPN is the same thing, only the corporate connection and modem are "virtual". Key point: Vendors claim that when the VPN is active, that the previous Internet access is disabled and all further communication goes through the corporation. Therefore, if the user wants to browse the web while the VPN is active, the user must browse through firewalls/proxies inside the corporation then back out to the web. However, this is just a bit of sleight-of-hand: while it appears to the user that normal Internet communication has been disabled, in reality it has only been "hidden": a hacker can still compromise the machine from the Internet. Key point: VPN puts the connection on the company's internal network, inside the firewall. Therefore, if a hacker compromises someone's machine who uses VPN, then the hacker has easy access to the inside of a hardened corporate environment. From Hacking-Lexicon

2. Usually refers to a network in which some of the parts are connected using the public Internet, but the data sent across the Internet is encrypted, so the entire network is "virtually" private. From Matisse