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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 in old movies. Those essential features are to provide switching and connection between any two (or more) telephone users.

Any system that does this automatically for telephone calls within an organization is a PBX. The reason businesses move to PBXs is to avoid requiring that every employee have a direct line to the public telephone system, each of which incurs a connection and 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.