Is 'free' phone service worth the price?

I just tried to use the free telephone service available thru Yahoo messenger. Basically it lets you use the internet to make phone calls – essentially free local or long distance service. As an experiment, I called someone about five blocks away and the quality was horrible. Felt as though I should be imitating Broderick Crawford from Highway Patrol, “10-4”, “over and out” (Oops, just gave away my age).

In any event, how does it work, and is the quality inherently bad because they’re trying to squeeze too much information thru too little space?