Demarc is the short form of demarcation, which is basically a physical point where the customer and service provider responsibility is marked. In common man terms the demarc is a point where the responsibility of the service provider ends. Anything on the network side of this was telecommunications network provider’s responsibility and anything beyond that is not.
The first telephone networks were completely owned by the service provider. Everything from the telephone equipment right up to the core infrastructure was telecom provider delivered and maintained. In this homogeneous network there was no concept of demarc at all.
However with unbundling, there were many third party equipments and devices that were introduced in the network. Now since, these were not installed by the network provider, they did not want to take ownership of them. This is where there was a need to introduce a demarcation point. The idea was that everything up to the demarc would be provided for and designed by the telecommunications provider and would fall under their purview.
The demarc introduction allowed customers to customise their internal networks as per their requirements. They just had to interface with the telephone provider on standard interface to access the service. Anything on the customer end of the demarc was their own responsibility and hence they could design it as they pleased.
Over the years, though the concept of demarc has changed in various countries. In the US, the demarc point is called a Network Interface Device which itself is owned by the service provider. It can be in indoor unit or an outdoor one. In the UK the demarc points are simple jacks with standard interface. The wiring to this jack is partially owned by customers and partially by service providers.
In conclusion, demarc is an important concept in modern telephony. It is a simple way to segregate the ownership of the network between the customer and the telecom network provider. Without this concept there would have been several unresolved issues in service fulfillment and assurance.