L2TP is an acronym for Layer Two Tunneling Protocol. It is used to establish a VPN (Virtual Private Network) over PPP (Point to Point Protocol). It is the product of two combined protocols, Microsoft's PPTP (Point to Point Tunneling Protocol) and Cisco's L2F (Layer Two Forwarding). L2TP requires an ISP's router to be configured to support the protocol.

More precisely, L2TP allows L2 and PPP endpoints to reside on different devices connected by a packet-switched network. The client establishes an L2 connection to a LAC (L2TP Access Concentrator) and the concentrator then tunnels individual PPP frames to an LNS (L2TP Network Server). The PPP frames are encapsulated into IP packets with L2TP headers, and subsequently are stripped back down to PPP frames upon being received at the LNS.

In terms of security, L2TP allows remote connections between clients and servers with privacy comparable to local networks, although L2TP is not secure enough to fully support VPN. RFC 2888 details how it can fully support VPN by using IPSec.

In terms of financial benefits, long-distance charges are eliminated by allowing clients to connect to local access concentrators, which extend PPP sessions virtually across the internet, rather than having the clients terminate directly at a distant LNS.

L2TP is fully detailed in the following RFCs:
RFC 2661 Layer Two Tunneling Protocol "L2TP"
RFC 2809 Implementation of L2TP Compulsory Tunneling via RADIUS
RFC 2888 Secure Remote Access with L2TP
RFC 3070 Layer Two Tunneling Protocol (L2TP) over Frame Relay

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