There are several ways data can be exchanged between controllers and device, including power lines, wireless and dedicated cabling. Some protocols use a mixture of all three.
Power Line Control (PLC)
This method uses existing electrical AC wiring. In PLC-based systems, data transmissions are synchronized to the point where the AC voltage is zero (Figure 2)
Figure 2: PLC transmissions sync'd to voltage zero crossing
(Image courtesy of HomeTech Solutions)
Most US homes have two-phase power, which means that there are two 120 VAC lines (black) and a neutral line (white) which enter the home at the service entry point. At the breaker panel, the neutral wire is shared with each circuit while the two 120 V wires are divided among circuits, alternating with every other circuit. (Figure 3)
Figure 3: Phases alternate in breaker panel
The key point to note is that since there are two separate AC sources, there are essentially two separate networks in your home. If you plug one PLC device into your master bedroom and another into your master bathroom which is only a few feet away, there is a chance that they are on two separate circuits.
Depending on the PLC technology you are using, you may need to install what is known as a coupler or bridge to join the two phases. This allows signals to travel from one 120 V line to the other.
Some of the newer protocols such as UPB and Insteon have solved this problem and no longer require couplers.
Radio Frequency (RF)
Wireless RF protocols are becoming more popular, primarily due to their ease of installation and reliability. There are two different types of wireless networks.
A Mesh network is one where every device in the network is a repeater and signals are passed from one device to another until it reaches its destination.
The other type of network is called a Peer to Peer (P2P) network. Devices in a P2P network send data directly to another device.
One thing to note with RF protocols is that there is a limit to the distance the data can travel before needing a repeater. This limit is typically 75 to 100 meters between devices and is greatly influenced by the environment the devices are in.
Variations such as the wall construction material and even air humidity will affect how far the signals will travel. This is typically not an issue for smaller homes (900 - 1800 sq. ft.), but can be more problematic for larger homes. Having a large home does not mean you can't use wireless. It simply means you need to plan accordingly.
These systems use dedicated cabling run directly from the controller to the devices being controlled. This could be a CAT5 wire running to a light switch or it could also mean the light switches' electrical wires are run to a central location where relays can control their state.
Furthermore, a serial cable (RS232) or telephone cable (CAT3) which is dedicated to controlling a device, could also classify a device as being hardwired. Again, this is one of those terms which is used loosely but often put into context using other information.
More often than not, home control protocols use a mixture of the above communication media. For instance, Insteon and X10 both have products that allow them to be used as PLCs or wireless. And Lutron has several products that use all three media. So the decision of which products to install typically does not come down to the type of communication media.