The Point-to-Point Protocol over Ethernet (PPPoE) is a network protocol for encapsulating Point-to-Point Protocol (PPP) frames inside Ethernet frames. It is used mainly with DSL services where individual users connect to the DSL modem over Ethernet and in plain Metro Ethernet networks. It was developed by UUNET, Redback Networks and RouterWare and is available as an informational RFC 2516.
Ethernet networks are packet-based and have no concept of a connection or circuit and also lack basic security features to protect against IP and MAC conflicts and rogue DHCP servers. By using PPPoE, users can virtually "dial" from one machine to another over an Ethernet network, establish a point to point connection between them and then securely transport data packets over the connection. It is mainly used by telephone companies, since PPPoE is easily integrated with legacy dial-up AAA systems and fits perfectly into the ATM backbones. The protocol also permits very easy unbundling of DSLAMs where required by regulators, since the user would simply use a different login into PPP, then the ATM circuit would be routed to the user's ISP. Also pre-paid traffic bucket business models can be created with PPPoE more easily than with DHCP or multiplexing multiple users with different speed tiers or QoS through 1 DSL modem or by creating a different login for each static IP purchased by customers.