The acronym PSTN stands for Public Switched Telephone Network. PSTN is the network that traditional phone systems used and was generally controlled by the telecommunication companies. This is the network our calls are travelling over when we pick up our handset and dial a number. This network spans the world and there are many different interfaces to it:
POTS: POTS stands for Plain Old Telephone Service. It is commonly used for residential use. POTS is an analogue system and is controlled by electrical loops. It is provided with copper wires run to residences and places of business and is, therefore, the cheapest and easiest telephone service to roll out.
ISDN: This is a faster and more feature-filled connection (also more expensive) This gained some popularity within small to medium-sized business as a cost-effective way of connecting to the PSTN and getting some advanced services, like many lines to one office or voice and data lines on one service. ISDN is a digital service and offers a few more features over POTS.
T1/E1: This is more expensive and used for high-volume data and voice networks. It is more common in larger companies, although in recent years it has become more affordable. T1/E1 is also a digital service and offers yet more features than ISDN, the most important feature being increased bandwidth that translates, in telephony, to more telephone lines.
The trouble with PSTN is that it's very static and in most countries it is strictly controlled by the telecommunication companies. If a business wants to make a lot of internal calls using the PSTN, it is by no means a cheap way to communicate. ISDN/T1/E1 are most commonly found at the external interface of a company's communication network, with all the internal communications going through internal lines that are controlled by an internal telephone system.