However, many dynamics, both in business and consumer scenarios, can be better addressed by peer-to-peer networks, in which every PC is both client and server at the same time. A peer-to-peer (or P2P) computer network relies primarily on the computing power and bandwidth of the participants in the network rather than concentrating it in a relatively low number of servers. P2P networks are typically used for connecting nodes via largely ad hoc connections. Such networks are useful for many purposes. Sharing content files containing audio, video, data or anything in digital format is very common, and realtime data, such as telephony traffic, is also passed using P2P technology.

A pure peer-to-peer network does not have the notion of clients or servers, but only equal peer nodes that simultaneously function as both "clients" and "servers" to the other nodes on the network. This model of network arrangement differs from the client-server model where communication is usually to and from a central server. A typical example for a non peer-to-peer file transfer is an FTP server where the client and server programs are quite distinct, and the clients initiate the download/uploads and the servers react to and satisfy these requests.

The earliest peer-to-peer network in widespread use was the Usenet news server system, in which peers communicated with one another in order to propagate Usenet news articles over the entire Usenet network. Particularly in the earlier days of Usenet, UUCP was used to extend even beyond the Internet. However, the news server system also acted in a client-server form when individual users accessed a local news server in order to read and post articles. The same consideration applies to SMTP email in the sense that the core email relaying network of Mail transfer agents is a peer-to-peer network while the periphery of Mail user agents and their direct connections is client server.

Some networks and channels such as Napster, OpenNAP and IRC server channels use a client-server structure for some tasks (e.g. searching) and a peer-to-peer structure for others. Networks such as Gnutella or Freenet use a peer-to-peer structure for all purposes, and are sometimes referred to as true peer-to-peer networks, although Gnutella is greatly facilitated by directory servers that inform peers of the network addresses of other peers.

The concept of peer to peer is increasingly evolving to an expanded usage as the relational dynamic active in distributed networks, i.e. not just computer to computer, but human to human. Yochai Benkler has coined the term "commons-based peer production" to denote collaborative projects such as free software. Associated with peer production are the concept of peer governance (referring to the manner in which peer production projects are managed) and peer property (referring to the new type of licenses which recognize individual authorship but not exclusive property rights, such as the GNU General Public License and the Creative Commons License).

The distributed nature of peer-to-peer networks also increases robustness in case of failures by replicating data over multiple peers, and -- in pure P2P systems -- by enabling peers to find the data without relying on a centralized index server. In the latter case, there is no single point of failure in the system.

When the term peer-to-peer was used to describe the Napster network, it implied that the peer protocol was important, but, in reality, the great achievement of Napster was the empowerment of the peers (i.e., the fringes of the network) in association with a central index, which made it fast and efficient to locate available content. The peer protocol was just a common way to achieve this.