When you place a local phone call, you are using a network of computers tied together with copper wire and fiber optic cable. Nearly every building in the United States has a Network Interface Device (NID). The NID is the connection point between your inside wiring and the telephone network.
The call begins from your phone which encodes sound vibrations into electrical analog signals which travel through the wiring, to your NID and out through what is referred to as the 'local loop'. The local loop is usually a twisted pair of copper wires that connects your home or office to what is called a "Central Office" (CO).
At the central office is a codec built into a hybrid. Using Pulse Code Modulation the codec encodes the analog signal into symbols representing 8 data bits. These PCM symbols are transmitted through the Central Office's digital cross connecting switch (DCCS) where multiple voice lines from an exchange are multiplexed together to form a T1 to a T3. Each central office serves one or more exchanges. This translates to the frist three digits of your local phone number. The CO determines which individual local loop is to be used by checking the last four digits of the phone number. The Central Offices are operated by the telephone company and are a centralization point where individual voice circuits are bundled together and multiplexed into high speed trunk lines.
A trunk line connects the CO to a toll office which brings together traffic from several exchanges. A Toll Office would switch calls point between several exchanges. Traffic entering the Toll office and departing the areas served by the Toll office would be bundled together into an Inter-Toll trunk line. Inter-Toll offices typically manage different area codes and are connected to the long distance services (AT&T, MCI, Sprint etc.).
Exchange/Central Office 111-222-3333
Toll Office 111-222-3333
Inter-Toll Office 111-222-3333
International Toll Office 011-111-222-3333 (U.S.A.)