There are two broad classes of packet-switched networks: datagram networks and virtual-circuit networks. They differ in whether their switches use destination addresses or so-called cirtual-circuit numbers to forward packets toward their destinations. Any network that forwards packets according to host destination addresses a datagram network. Any network that forwards packets accorsing to virtual-circuit numbers a virtual-circuit network.

As the name suggests, a virtual circuit (VC) can be thought of as a virtual conncetion between a source and destination host. A virtual-circuit identifier (VC ID) will be assigned to a VC when a VC is first established between sources and destination. Any packet that is part of the VC has the VC ID in its header.

Datagram networks are analogous in many respects to the postal service.