A SIP phone is simply an IP or VoIP phone that runs the SIP (session initialization protocol) protocol. A SIP phone can be a physical IP handset or even a Softphone, which is a software application running on a desktop or laptop.
A SIP phone is based on the SIP protocol and they are connected to one another over a local area network or the internet. These phones communicate using the SIP protocol, hence their name. SIP allows people around the world to connect and hold telephone conversations with one another. They manage this without using the PSTN, because they can use the internet instead. More importantly, SIP calls are free.
SIP works using a specific SIP address and a SIP client, which can be installed on a PC, in the case of a SIP Softphone. The SIP client will be integrated into a SIP hardware IP phone, but you will still need the SIP address. A SIP address is readily obtained often free from VoIP service providers. A SIP address is then used as you would a phone number, by sharing with those whom you wish to communicate and entering their SIP address into your phone or Softphone when you wish to call them. Entering the SIP address typically involves browsing a list of entries.
SIP as a protocol handles the session initiation and sets up the connection between the two end parties. SIP is very easy to use, configure and use. Furthermore, many VoIP providers supply free SIP addresses and client software as part of their VoIP services.