What Is IP Transit
IP transit is what Internet providers sell. In the most simple terms, it is a connection to the Internet. It is different from transport or from peering.
IP transit is a service which provides connectivity to the Internet. A network which sells IP transit is called an "upstream" network. This is in reference to a river. Water flows downstream, from the upstream of the river. Internet data also flows down from the upstream network.
An upstream network will have their own network and then will have a connection to all other networks on the Internet. Many networks sell IP transit, but also buy IP transit from even larger networks. There's only a handful of really large networks that do not buy IP transit from anyone.
These large networks are called 'backbone' networks. They are so huge that instead of anyone selling them transit, they just peer with each other. Peering is usually a free way of networks to connect to one another.
The largest networks include: Level 3 (AS3356), TeliaSonera (AS1299), NTT (AS2914), GTT (AS3257), Cogent (AS174) and TATA (AS6453). These are the Internet backbone providers.
These backbone networks sell IP transit to other smaller networks. These smaller networks then go and sell IP transit to even smaller networks. This continues until every single device on the whole Internet is able to connect to every other device through a series of peering and transit agreements. If peering and transit did not occur, the Internet would not exist. Instead it would be a bunch of isolated networks which did not have a way of communicating with one another.
The protocol that Internet providers and peers communicate with is the Border Gateway Protocol (BGP). This is an external gateway protocol (a network can also run iBGP, which is internal). Using BGP networks "announce" different sets of routes to each other. A "route" is just an IP block (eg. 192.168.2.0/24).
When a network announces a route to another network, it means that the first network knows a path to reach that route. In other words, network A tells network B, "hey, I know how to get to IP block X.X.X.X".
A network might have many different paths to an IP block and BGP helps choose the best path. This is beyond the scope of this article.
Anyway, by using BGP an upstream provider is able to tell it their customer that the upstream knows a route to all points on the Internet.
You do not have to run BGP to purchase IP transit. The upstream provider can instead simply provide you with a default gateway. You then use this default gateway inside your network to reach the rest of the Internet, and only your upstream provider has to worry about setting up BGP with the rest of the Internet.
Most IP transit providers are able to give some sort of guidance to new customers as to what type of Internet services will best suite their needs.
There is a lot of businesses out there who are not tech savvy and do not have much of an IT department. Yet with the help their upstream, they are able to connect to the Internet. So if you don't understand anything else about it, know that IP transit is a way to reach the whole Internet.