As found in the webopedia dictionary http://www.webopedia.com/TERM/V/VPN.html, a virtual private network is "a network that is constructed by using public wires to connect nodes... These systems use encryption and other security mechanisms to ensure that only authorized users can access the network and that data cannot be intercepted."
Through VPN, when you use your special assigned code to access your companies computer system from a remote location, the message that you send to the home computer is encrypted and the home computer then decrypts the message when it receives it. Then the reverse works when the home computer sends you information. The file is again encrypted and when your remote computer receives it, it decrypts the information so you can read it.
Below is an image of VPN connecting a main office to different types of remote locations; a home office, a remote office and a mobile worker.

Image courtesy Cisco Systems, Inc.
Examples of the three types of VPN
There are also different types of encryptions that can be used. One example is the symmetric-key encryption. In this type, each computer has a secret key or code, so you must know which computers will be using this system so that they all have the code. With this secret code your computer can encrypt a packet of information before sending it across the Internet. Therefore, if it is intercepted, it is useless to anyone except someone who has the same secret code. When another computer, that has also been equipped with this code receives the message it can decode the information. A simpler way to describe this method is by using two friends who create some alphabet code between themselves so that they can pass secret notes back and forth (ie every "a" becomes a "c", every "c" becomes an "e", etc.). One friend writes a note in this agreed upon secret code and then when he passes the note to his friend, she can use their private code to understand what he is saying to her. The symmetric-key encryption works in much the same way, between computers.
To learn of other encryption methods or a more in depth description of how VPN works and what it can do for your company, please follow the below link to the website of Alliance Datacom L.P.
http://www.alliancedatacom.com/how-vpn-works.asp
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