L2TP over the Internet - L2TP VPN tutorial
L2TP (Layer 2 Tunneling Protocol)
L2TP is an extension of the PPTP (Point to point tunneling protocol), used by internet service providers to provide VPN services over the internet. L2TP combines the functionality of PPTP and L2F (Layer 2 forwarding protocol) with some additional functions using some of the IPSec functionality. L2TP uses the authentication methods of PPP, in PAP (Password Authentication Protocol) and CHAP (Challenge Handshake Authentication Protocol), and uses NCP (Network Control Protocol) to negotiate IP address assignment.
L2TP is seen as the replacement for PPTP and L2F. L2TP's other main advantage is that it is routable over other networks as well as IP. PPTP is only routable over IP. Also L2TP can be used in conjunction with IPSec to provide encryption, authentication and integrity. Ultimately IPSec is the way forward and is considered better than the layer 2 VPN’s such as PPTP and L2TP.
Further Reading
Wikipedia's guide to L2TP (Layer 2 Tunneling Protocol)