PBXs make connections among the internal telephones of a private organization — usually a business — and also connect them to the public switched telephone network (PSTN) via trunk lines. Because they incorporate telephones, fax machines, modems, and more, the general term "extension" is used to refer to any end point on the branch.

• Establishing connections (circuits) between the telephone sets of two users (e.g. mapping a dialled number to a physical phone, ensuring the phone isn't already busy)
• Maintaining such connections as long as the users require them (i.e. channelling voice signals between the users)
• Disconnecting those connections as per the user's requirement
• Providing information for accounting purposes (e.g. metering calls)

In addition to these basic functions, PBXs offer many other calling features and capabilities, with different manufacturers providing different features in an effort to differentiate their products. Common capabilities include (manufacturers may have a different name for each capability):

• Auto attendant
• Auto dialing
• Automatic call distributor
• Automated directory services (where callers can be routed to a given employee by keying or speaking the letters of the employee's name)
• Automatic ring back
• Call accounting
• Call forwarding on busy or absence
• Call park
• Call pick-up
• Call transfer
• Call waiting
• Camp-on
• Conference call
• Custom greetings
• Customised Abbreviated dialing (Speed Dialing)
• Busy Override
• Direct Inward Dialing
• Direct Inward System Access (DISA) (the ability to access internal features from an outside telephone line)
• Do not disturb (DND)
• Follow-me
• Interactive voice response
• Music on hold
• Night service
• Shared message boxes (where a department can have a shared voicemail box)
• Voice mail
• Voice message broadcasting
• Voice paging (PA system)
• Welcome Message

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