Stands for "Point-to-Point Protocol over Ethernet." PPPoE is a network configuration used for establishing a PPP connection over an Ethernet protocol. It is commonly used for creating DSL Internet connections. Since DSL modems typically connect to computers via an Ethernet connection, a standard dial-up PPP connection cannot be used. Therefore, PPP over Ethernet allows computers to connect to an Internet service provider (ISP) via a DSL modem.
PPPoE is a network configuration option found in the Network control panel (Windows) or the Network system preference (Mac OS X). In order to create a PPPoE connection, you will need to enter the service name provided by the ISP as well as a username and password. This provides a simple way for the ISP to uniquely identify your system and establish your Internet connection. PPPoE can be contrasted to DHCP, which dynamically assigns unique IP addresses to connected systems and is typically used by cable Internet service providers.
The biggest advantage of a PPPoE configuration is that it is easy to set up. It also supports multiple computers on a local area network (LAN). The downside of PPPoE is that it requires additional overhead, or extra data, to be sent over the Internet connection. A standard PPPoE connection adds 8 bytes of data to each packet transmitted. While this is only a small fraction of packets that have an MTU of 1500 bytes, some connections use packets as small as 60 bytes, which means PPPoE adds over 13% overhead. For this reason, many DSL providers now offer DHCP configurations as well.