Both are types of business phone systems but the way they connect callers to businesses is the key difference. PBX stands for private branch exchange and is a system by which enterprises switch calls between users on local lines.  A business may have a hundred employees connected through telephone lines, but instead of having a hundred telephone lines, it has one PBX box and one business phone number which connects to these hundred lines through extensions.  Messages are transferred between the lines using analog technology. However, a virtual phone system uses digital technology to transfer messages.  While a PBX system is not connected to the internet, a virtual phone system does not have any hardware, is connected to the internet, and makes calls over the internet.