The Collaborative International Dictionary of English v.0.48:

Telephone exchange \Tel`e*phone ex*change"\
   A central office in which the wires of telephones from local
   subscribers may be connected by switches to other local
   telephones or to long-distance lines, to permit transmission
   of conversation or data.

   Note: In the late 1990's the traditional copper wires
         connecting local telephones to the telephone exchange
         have begun to be replaced with optical fiber
         connections.
         [Webster 1913 Suppl. +PJC]

The Collaborative International Dictionary of English v.0.48:

exchange \ex*change"\ ([e^]ks*ch[=a]nj"), n. [OE. eschange,
   eschaunge, OF. eschange, fr. eschangier, F. ['e]changer, to
   exchange; pref. ex- out + F. changer. See Change, and cf.
   Excamb.]
   1. The act of giving or taking one thing in return for
      another which is regarded as an equivalent; as, an
      exchange of cattle for grain.
      [1913 Webster]

   2. The act of substituting one thing in the place of another;
      as, an exchange of grief for joy, or of a scepter for a
      sword, and the like; also, the act of giving and receiving
      reciprocally; as, an exchange of civilities or views.
      [1913 Webster]

   3. The thing given or received in return; esp., a publication
      exchanged for another. --Shak.
      [1913 Webster]

   4. (Com.) The process of setting accounts or debts between
      parties residing at a distance from each other, without
      the intervention of money, by exchanging orders or drafts,
      called bills of exchange. These may be drawn in one
      country and payable in another, in which case they are
      called foreign bills; or they may be drawn and made
      payable in the same country, in which case they are called
      inland bills. The term bill of exchange is often
      abbreviated into exchange; as, to buy or sell exchange.
      [1913 Webster]

   Note: A in London is creditor to B in New York, and C in
         London owes D in New York a like sum. A in London draws
         a bill of exchange on B in New York; C in London
         purchases the bill, by which A receives his debt due
         from B in New York. C transmits the bill to D in New
         York, who receives the amount from B.
         [1913 Webster]

   5. (Law) A mutual grant of equal interests, the one in
      consideration of the other. Estates exchanged must be
      equal in quantity, as fee simple for fee simple.
      --Blackstone.
      [1913 Webster]

   6. The place where the merchants, brokers, and bankers of a
      city meet at certain hours, to transact business; also,
      the institution which sets regulations and maintains the
      physical facilities of such a place; as, the New York
      Stock Exchange; a commodity exchange. In this sense the
      word was at one time often contracted to 'change
      [1913 Webster +PJC]

   Arbitration of exchange. See under Arbitration.

   Bill of exchange. See under Bill.

   Exchange broker. See under Broker.

   Par of exchange, the established value of the coin or
      standard of value of one country when expressed in the
      coin or standard of another, as the value of the pound
      sterling in the currency of France or the United States.
      The par of exchange rarely varies, and serves as a measure
      for the rise and fall of exchange that is affected by the
      demand and supply. Exchange is at par when, for example, a
      bill in New York, for the payment of one hundred pounds
      sterling in London, can be purchased for the sum. Exchange
      is in favor of a place when it can be purchased there at
      or above par.

   Telephone exchange, a central office in which the wires of
      any two telephones or telephone stations may be connected
      to permit conversation.

   Syn: Barter; dealing; trade; traffic; interchange.
        [1913 Webster]

WordNet (r) 3.0 (2006):

telephone exchange
    n 1: a workplace that serves as a telecommunications facility
         where lines from telephones can be connected together to
         permit communication [syn: central, telephone exchange,
         exchange]