Most of the people always have this question in their mind. well here is an answer from Quora submitted by Derek Schatz. 

There are two primary methods to enable a passenger Internet connection on an airplane: Satellite and air-to-ground. I’ll talk about some of the key points on each of those, then talk about the in-cabin WiFi access point part.

Air-to-ground

• As the name implies, signals go from the airplane directly to antennas on the ground
• Uses a network of ground cell towers across the continental U.S. (therefore does not work over water). These towers’ cells are much larger than those of the typical cell towers used for phones.
• Uses a version of CDMA, just like Verizon cell phones
• Antennas are on the belly of the airplane, looks like a small fin
• As the airplane flies, the connection hands off from one tower to the next just like your phone does when you’re driving. Users don’t notice any interruption.
• Network infrastructure is much cheaper than satellite
• Bandwidth for the newest generation system (ATG4) is up to 9.8 megabits per second (Mbps) per airplane (shared across all users). This is enough for email and casual web surfing, but would get quickly exhausted if people stream video – so this is usually blocked.
• Gogo is the top provider of this type of service.
• Installed on over 1,000 aircraft operating on domestic routes in the U.S., including Delta, American, Virgin America, and Alaska
• Plans announced in late 2014 by Inmarsat to partner with Gogo on a hybrid ATG+satellite solution for Europe

Satellite

• Unlike air-to-ground, signals from the airplane go into space to an orbiting satellite and then down to the ground. These satellites are usually in geostationary orbit, 22,300 miles up.
• Three types offer different levels of performance (bands indicate specific transmission frequency ranges):
  • L-band (e.g. Inmarsat Swift Broadband): pretty slow, max 422kbps per channel per airplane
  • Ku-band (e.g. Panasonic, Global Eagle, and Gogo): tops out at around 20-40Mbps per airplane. Speeds depend on how many airplanes are in the satellite’s transponder “footprint” (aka spot beam)
  • Ka-band (near future, satellites launching soon): promises even higher speeds
• A modern satellite has dozens of transponders to support a large number of simultaneous connections, e.g. ships, airplanes, portable ground terminals
• Leasing transponders (antennas) on satellites is very expensive, so this cost is usually passed on to the airline and the passengers. But Jetblue offers it for free.
• The airplane’s antenna is on the top of the fuselage, under a bubble-shaped radome
• Only choice for trans-oceanic routes, and routes flying closer to the polar region (since you can’t put cell towers in the ocean)
• Using satellites means a few hundred milliseconds more latency since the data packets need to go 22,300 miles up to the satellite, then roughly 22,300 miles back down to the airplane. New constellations of low earth orbit (LEO) satellites providing lower latency high bandwidth connections are in development since 2015, e.g. by SpaceX.
• Installed base not large yet but growing, targeted initially for routes between the U.S. and Europe
• As the airplane flies, the antenna on the top of the plane is steered or electronically aimed to stay pointed at the correct transponder on the satellite up in orbit. For long-haul flights, there will likely be a handoff from one satellite to another when moving between coverage areas. This happens via coordination on the ground, and the airborne users may only notice a very brief hiccup. From the satellite’s viewpoint, it switches airplanes from one transponder to the next as it moves between the beams pointed at the ground.

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