L2TP stands for Layer 2 Tunneling Protocol. L2TP was first proposed in 1999 as an upgrade to both L2F (Layer 2 Forwarding Protocol) and PPTP (Point-to-Point Tunneling Protocol). Because L2TP does not provide strong encryption or authentication by itself, another protocol called IPsec is most often used in conjunction with L2TP.
IPsec stands for Internet Protocol security. IPsec is a very flexible protocol for end-to-end security that authenticates and encrypts each individual IP packet in a given communication. IPsec is used in a wide range of applications at the Internet Layer of the Internet Protocol suite.
Used together, L2TP and IPsec are much more secure than PPTP (Point-to-Point Tunneling Protocol) but are still more suited for anonymization than for security.
L2TP sometimes has problems with firewalls because of its use of UDP port 500, which some firewalls have been known to block.