"Only extension to extension?"

No, of course not. But remember the "catch" that you asked about? Well I never answered that. There may be a number of "catches" with Asterisk and this is the first.

To make calls outside your private phone system you need some sort of connection to the public switched telephone network (PSTN). PSTN that's the existing phone network as you know it, or remember it. Sometimes people also call this plain ol' telephone service or POTS. There are two primary ways to do this. I'll cover the first now and the second later.

Have you seen all the ads on TV lately for VoIP companies? With a VoIP phone you can connect to one of these companies and make and receive phone calls. The VoIP phone digitizes your voice and sends it over the Internet to the VoIP company. The VoIP company has PSTN connections to allow you to make your call to real telephone numbers. And the reverse is also true. The VoIP company has real telephone numbers they assign to receive calls that will automatically go through their system and be routed over the Internet to your VoIP phone. Well Asterisk can be a VoIP phone to those companies. Many of the companies already know about Asterisk and will tell you how to set up your Asterisk system to work with them so any PC in your house can call a real telephone. The "catch" is that these services cost money. And you will need an Internet connection (high-speed). However, you may save money over what your local telephone company charges.

"My high-speed Internet service is digital subscriber line (DSL) over my phone-line. Can I drop the phone-line and keep DSL?

It depends on your carrier. My carrier doesn't offer "naked" DSL (i.e. DSL service and no phone line), but some do. This might seem to negate the use of Asterisk with a VoIP service, but you don't need long distance service from your land-line carrier in this case. And the VoIP service may be cheaper or provide better coverage.

"But can I use a real telephone with Asterisk?"

Sure. But you can't really plug a telephone directly into an Asterisk system or into your local computer network. There are multiple "gotchas" (i.e. each costs money) available to solve this problem:

1. You can get an adapter, called an analog telephone adapter (ATA), that will convert your phone's output into VoIP to go over your computer network to Asterisk.
2. Or you can get a VoIP telephone. Some are available for as low as $60.
3. You can add an adapter card to the PC that supports one or more analog telephones or telephone lines with one or more analog telephones on it. The phone or phones plugged into each adapter become one extension on your Asterisk system. Any phone on the line can pick up answer a ring or joing in a conversation just like a party line. You can run a separate line to the PC so that each analog telephone can have its on extension number and private connection. But, of course, you need an adapter for each phone in that case.