This is a very interesting read on Arstechnica on what "peering" and "transit" is. Ever wondered how your local internet provider manages to be connected to every other network out there? How can anyone, no matter how small they are, ever start their own ISP business - when there are so many people to connect to. Wouldn't this be an unusually high setup cost to get this started? Yes, no, maybe, perhaps, only if, not until, ...
I invite you to read up on this story, titled "How the 'Net works: an introduction to peering & transit". It provides a very detailed answer to how the internet, and every (independant) network it embodies, actually works. From Autonomous Systems, to IP-space, to nice graphs showing connectivity, ... It's detailed enough. Let's keep it at that.
