Google's Hangouts platform uses peer-to-peer connections during calls when possible to help with stability. Allowing for direct connections between two peers enables the company to provide a more stable service without having to route through servers.
Whether you're rocking the web client or the official app for Android, there's nothing worse than poor quality video and voice calls.
To improve audio and video quality, Hangouts calls use a direct peer-to-peer connection when possible. This allows Hangouts to more efficiently route your call directly to the person you're talking to, rather than connecting the call through one of Google's servers.
As a side note, using peer-to-peer connectivity will make your IP address available for viewing, but this is a worthy feature for the app on your smartphone especially if you've found the call and video quality to be sub-par.
Source: Google
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