For the rest of 2006, calls to any phone number in the US from Skype are free. Incoming calls, if you want it to have a real phone number, require pre-paid credits.
AOL has launched AIM Phone, which works the opposite--incoming calls are free, but you have to pay for outgoing calls. So if you sign up for both Skype and AIM, you could make and receive all of your calls for free. (AIM Phone was not available in every market when it first launched though; I'm not sure if that's still the case.)
Skype is a P2P service, unlike most other VOIP carriers, so when you're signed into Skype it uses your connection to route other people's calls. All calls are encrypted with a key-based system.
Skype-to-Skype calls are always free, though, and it's a really nice system--much easier than setting up your own TeamSpeak or Ventrilo server. I use it to stay in touch with friends abroad--you can't beat free calls to Canada and Algeria.