Peering is the term used for connections between BGP speakers. Technically, any two routers running BGP which have different AS numbers are peering. However, in the Telecommunications and Internet provider arena, the term 'peering' has taken on a politically-loaded meaning that is unrelated to the technical process and more related to the politics of which ISP is paying whom for the connection.
PUBLIC PEERING
Originally, four main locations were established where anyone who could afford to pay the local telephone company for a data circuit could connect. In those days there were so few connection points between networks that everyone who connected to the public peering points set up a BGP session to everyone else connected there. This increased access between networks dramatically, but this created other problems, such as route flaps and congestion.
PRIVATE PEERING
Now here's where the politics comes in. Today, the majority of peering connections are private, and are paid connections. These connections carry public Internet user's traffic; however, they become overutilized over time. The connections are only upgraded when the company that is purchasing the connection pays for a bigger circuit.
The problem is, each ISP will always blame the other, leaving the customer in the middle to sort it out himself.
THE POLITICAL PROBLEM
People don't pay to use an Internet Provider's network, they pay for access to Internet destinations. A provider who won't peer isn't willing to connect to destinations such as Yahoo, Google, Microsoft and AOL. The Internet belongs to noone. The Internet is not the property of any ISP. The Internet is the combination of all the public networks on the planet. Therefore, connectivity between one provider's network and everyone else's is the prime capital investment any Internet company can make. Unfortunately, the managers of these companies are not, and never have been technical people. They don't understand this basic fact and go out of their way to shut down connections to outside networks because they are 'unprofitable', even when the connection is matched by an equal connection installed by the other provider to handle traffic in the opposite direction.