There are many different types of terminals out there, but they can all be separated into three categories based on how they connect to your Merchant Account processor.
Dial-up, phone line based terminals: This is your basic terminal which you'll find in a majority of small to medium sized businesses. If you do some research, you'll find that these are overall the least costly machines and the ones that have been around the longest. In order to use this type of equipment, you're business will need a dedicated, analog phone line. By analog, I mean a regular landline, not digital or Voice Over IP.. By dedicated, I mean that it shouldn't be a phone line which is part of a greater office phone system, such as a PBX or IP-PBX System. Though your office can use one of these, you should speak to your phone people about getting a dedicated phone line which is separate from your system. Many times, a merchant will already have a fax machine which runs off of a dedicated line. One good thing to note is that almost all dial-up credit card terminals come with an extra phone port so that they can share the phone line with a fax machine or a single phone. The one problem here is that you wouldn't be able to use your credit card machine and your phone or fax machine at the same time. The next type of terminal connectivity eliminates this problem
Ethernet/IP-based terminals: These terminals work off of your broadband internet connection, and they are great for merchants who use Vonage or other Voice Over IP solutions. Basically, you'd attach your terminal to a Cable Modem, DSL Modem, or into your IP Router in order for the terminal to process transactions. Two great advantages to IP terminals is that they process transactions faster and that they allow you to process transactions and leave phone lines open, allowing you to conduct business without having to wait to free up a line or receive phone calls without worrying about disrupting your credit card terminal. There are also two disadvantages: Firstly, these terminals are usually more expensive than dial-up terminals. Secondly, if you're experiencing problems with your IP-terminal and need to perform a download to correct programming problems, you may need an analog phone line. Though your terminal will work over IP for authing credit cards, there's a great chance your processor won't have the ability to have your terminal pick up your merchant information over IP. It's been my experience that many merchants who use the internet or VoIP for their phone service won't have a backup analog phone lines for situations like this. I'd advise you to invest in a phone line for this very reason. It can prevent downtime your business would experience from your Internet Connection or VoIP connection being down.
Wireless terminals: No in-depth explanation necessary. Just like a cell phone, these credit card terminals access a cellular network such as GPRS or CDMA to send info to the credit card processor. Although these are usually the most expensive of the three connectivity types, they are definitely worth it for merchants who process a volume of credit card transactions at trade show sales events or in on-site situations like a plumber or carpenter who comes to your house to make improvements. With this terminal, you will have the piece of mind knowing whether or not a customer's card will go through at the actual point of sale instead of writing down their information and bringing it back to your office to be keyed in. Not only will it give you piece of mind, but swiped credit card accounts generally get lower rates than those of a MOTO or Keyed Face to Face merchant account would so it may end up saving you money in the long run.