When would you need this: When you are creating a WAN link. And also when the other end of a WAN link is NOT a Cisco router. Point-to-Point Protocol can be used in synchronous, asynchoronous, HSSI, and ISDN links.
Special Requirements: None.
1. Get to the interface configuration mode and issue the following command,
2. If you want to configure authentication (which is almost always the case), go through the following steps:
a. Choose the authentication type; Password Authentication Protocol (PAP), or Challenge Handshake Authentication Protocol (CHAP).
Router(config-if)#ppp authentication XXX
where XXX is the authentication type which can be: pap, chap, pap chap, or chap pap. The last two choices are to use the other authentication type when the first one fails.
CHAP is strongly recommended over PAP for two reasons. First, PAP sends the username and password in plaintext, while CHAP sends hashed challenges only. Second is that CHAP does an operation similar to periodic re-authentication in the middle of the communication session such that it provides more security than PAP.
b. Set a username and a password that the remote router would use to connect to your local router. You can define many username-password pairs for many PPP connections to the same router.
Router(config)#username USER password PASS
where USER is the host name of the remote router, and PASS is its password. Issue this command once for each PPP connection. For example if you are connecting RouterA to RouterB and RouterC, on RouterA issue this command once for each remote router.
Read the rest of the article in the Router Geek Book: Guide to Cisco Routers Configuration