The 110 has a Line port to connect to an existing telephone line (POTS). many people have disconnected that connection but if ATT still supplies 911 service after you cancel service, you might want to keep that. Some states require the old phone companies to continue to supply 911 service to you even after cancelling service with them.
The PHONE port can connect to 1 or multiple phones (there is a limit) but they are all like your current phones in the house, they share the same dial tone.
The Internet connection allows you to access other local or long distance companies (VOIP suppliers).
The 110 has slots for two of those. Many people use GoogleVoice for one provider and perhaps another provider for the second slot.
The 110 (and other Obis) allow you to ROUTE calls from the phone to the old ATT connection or to Googlevoice or the other VOIP companies you have chosen.
Incoming calls could be routed to go to another VOIP provider and call out or to the phone, etc. Usually, the calls come to the connected phone instrument.
Think of the box as your "phone company". You can sign up for services and have them send calls to you. You can decide which company to send certain calls to, depending upon how many minutes you buy from them or whether they serve a certain part of the world with reasonable rates, etc.
If you decide that you want to keep the connection to ATT (for 911 service) and use VOIP providers AND have multiple phones in the house be able to use the OBI, you would IN general:
1) Break the connection between the incoming phone line to your house and the point where all the current phones attach
2) You would then connect the existing phones to the PHONE port and connect the LINE port so it looks out to ATT.
This puts the 110 between your house phones and the ATAT "phone company"
The Obi can be instructed to place 911 calls out through ATT and any other calls through , say GoogleVoice for free. This "routing" of calls is one of the plusses to the Obi.
If you wanted 2 different phone lines (say home and office) and did not need connection to your old phone company, then an Obi202 might have been a better choice. It has 2 phone slots, no line port and has space for 4 VOIP providers.
The 110 does allow you to have 2 incoming telephone connections and many people use that to provide them 2 different telephone numbers to come to their Obi, but they would generally ring on the same phone attached to it. One number might be a FAX number and come in with a differebt ring (selective ringing) and so on.
The Obi boxes are pretty versatile and people keep finding new ways to sue them. because each persons needs differ, some pretty weird and complex routing has been requested and forum volunteers help as best as we can.