http://www.thegeekstuff.com/2009/01/overview-of-poe-power-over-ethernet-concepts-and-devices-list/
1. What is PoE – Power Over Ethernet?
Power over Ethernet (PoE) does exactly what it says — it carries power over ethernet cables. So, an ethernet cable caries both data and current together to operate devices like wi-fi access points, security cameras, kiosks, etc. This is very helpful to install wi-fi access points in ceilings, where it is hard to locate power outlets. Only very low-power devices can be powered using the PoE, as it carries limited power over the ethernet cable.

Fig 1: A Typical PoE Setup (Image From: PowerOverEthernet.com)
2. How does PoE works?
Following are the terminologies used in the PoE network:
Cat5 ethernet cable has 4 twisted pairs. Out of 4 pairs:
There are two approaches to transfer power over ethernet.
Approach 1 uses data pairs:
The same 2 pairs used for data transfer, is used to carry power. The PSE injects power to the 2 data pairs (pin 1,2 and pin 3,6) via the center tap of the transformers without affecting the data transfer.

Fig 2: PoE Approach 1 uses data pairs to send power (Image From: PowerOverEthernet.com)
Approach 2 uses the spare pairs:
The 2 spare pairs that are not used, is used to carry power. It applies +ve voltage to pins 4 and 5 of ethernet cable. It applies -ve voltage to pins 7 and 8.

Fig 3: PoE Approach 2 uses spare pairs to send power (Image From: PowerOverEthernet.com)
3. What are the Benefits of PoE?
Case Study - Purdue University Details how Purdue was able to save $300 to $1000 per device by utilizing PoE and eliminating the labor costs incurred in contracting expensive electricians to install wiring for new AC outlets. Excerpt: "Through the use of Power-over-Ethernet, Mr McCoy discovered that his utilization of PoE save between $350 to $1000 per installation by eliminating the labor costs incurred from contracting an electrician to run wiring for new AC outlets."
Veracity - Power without the Struggle Describes the benefits of PoE technology, and how to take full advantage of them. Excerpt: "The benefits of PoE as a power delivery method include drastically lower installation and maintenance costs, and its technology offers a supply that is reliable, safe, efficient and robust, while being as simple as possible to install."
Global Action Plan - An Inefficient Truth A GAP analysis of the impact of ICT (Information and Communication Technology) on carbon emissions, and describes several technological solutions to reducing the impact including the utilization PoE technologies. Excerpt: "Power over Ethernet (PoE) combines data and operating power (15W, 48V) into a single Ethernet cable. PoE can deliver power to IP telephones, wireless routers, security devices and various other low power equipment using standard cabling without any modification to existing infrastructure(66). This reduces the need for AC cabling and provides power to remote Ethernet devices. It allows cheap, fast and more resilient installation(67). High deployment of PoE gives control and flexibility to facility managers. The power supply to lights, computers and peripherals could all be controlled through PoE allowing these to be turned on or off centrally."