Frame Relay provides significant advantages over simply using point-to-point leased lines.  The primary advantage has to do with virtual circuits.

A virtual circuit defines a logical path between two Frame Relay DTEs.  The term virtual circuit describes the concept well.  It acts like a point-to-point circuit, providing the ability to send data between two endpoints over a WAN.  There is no physical circuit directly between the two endpoints, so it’s virtual.

VCs share the access link and the Frame Relay network.  Many customers share the same Frame Relay network.  Originally, people with leased-line networks were reluctant to migrate to Frame Relay, because they would be competing with other customers for the provider’s capacity inside the cloud.  To address these fears, Frame Relay is designed with the concept of a committed information rate (CIR).  Each VC has a CIR, which is a guarantee by the provider that a particular VC gets at least that much bandwidth.

Even with a three-site network, it’s probably less expensive to use Frame Relay than to use point-to-point links.  Imagine an organization with 100 sites that needs any-to-any connectivity.  4950 leased-lines would be required.  The organization would also need 99 serial interfaces per router if it used point-to-point leased lines.  With Frame Relay, an organization could have 100 access links to local Frame Relay switches, one per router, and have 4950 VCs running over them.  You would only need one serial interface / router.

Service providers can build their Frame Relay networks more cost-effectively than for leased lines.  That makes it less expensive for Frame Relay customers as well.  For connecting many WAN sites, Frame Relay is simply more cost-effective than leased lines.

Two types of VCs are allowed – permanent (PVC) and switched (SVC).  PVCs are predefined by the provider; SVCs are created dynamically.  PVCs are by far the more popular of the two.  Frame Relay providers seldom offer SVC as a service.

When the Frame Relay network is engineered, the design might not include a VC between each pair of sites.  A full-mesh Frame Relay network has a VC between each pair of sites.  When not all pairs have a direct PVC, it is called a partial-mesh network.

The partial mesh has some advantages and disadvantages compared to full mesh.  The primary advantage is that partial mesh is cheaper, because the provider charges per VC.  The downside is that traffic from two non-VC’d sites would need to pass through the VC link to the site they are both VC’d to and get routed.

One conceptual hurdle with PVCs is that there is typically a single access link across which multiple PVCs flow.  Since data is coming and going out the same interface, you need to be able to address the location.  To solve this problem, Frame Relay uses an address to differentiate one PVC from another.  This address is called a data-link connection identifier (DLCI).  The name is descriptive: The address is for an OSI Layer 2 (data-link) protocol, and it identifies a VC, which is sometimes called a virtual connection.