Packet switching works by dividing a source messages into smaller packets which are then sent to the destination. Each packet is sent individually and may not necessarily take the same route to the destination. Once the packets arrive they are then placed together in the correct sequence to create the initial message.
Packet switching is efficient and robust for communication that may have some transmission delay, such as e-mail messages and Web pages, whereas, circuit switching is better if the data must be transmitted quickly and has to arrive in the exactly the same order in which it’s sent, e.g. real time voice and video.
Many key WAN protocols are based upon this technology, such as TCP/IP, X.25 and Frame Relay.
Have a look at this flash animation about packet switching.
Have a look at this wikipedia resource on packet switching.
Next: 1.4 Cell Switching