In a cellular network, the radio and fixed links required are not permanently allocated for the duration of a call. Handover, or handoff as it is called in North America, is the switching of an on-going call to a different channel or cell. The execution and measurements required for handover form one of basic functions of the RR layer.
There are four different types of handover in the GSM system, which involve transferring a call between:
* Channels (time slots) in the same cell
* Cells (Base Transceiver Stations) under the control of the same Base Station Controller (BSC),
* Cells under the control of different BSCs, but belonging to the same Mobile services Switching Center (MSC), and
* Cells under the control of different MSCs.
The first two types of handover, called internal handovers, involve only one Base Station Controller (BSC). To save signalling bandwidth, they are managed by the BSC without involving the Mobile services Switching Center (MSC), except to notify it at the completion of the handover. The last two types of handover, called external handovers, are handled by the MSCs involved. An important aspect of GSM is that the original MSC, the anchor MSC, remains responsible for most call-related functions, with the exception of subsequent inter-BSC handovers under the control of the new MSC, called the relay MSC.
Handovers can be initiated by either the mobile or the MSC (as a means of traffic load balancing). During its idle time slots, the mobile scans the Broadcast Control Channel of up to 16 neighboring cells, and forms a list of the six best candidates for possible handover, based on the received signal strength. This information is passed to the BSC and MSC, at least once per second, and is used by the handover algorithm.
The algorithm for when a handover decision should be taken is not specified in the GSM recommendations. There are two basic algorithms used, both closely tied in with power control. This is because the BSC usually does not know whether the poor signal quality is due to multipath fading or to the mobile having moved to another cell. This is especially true in small urban cells.
The 'minimum acceptable performance' algorithm  gives precedence to power control over handover, so that when the signal degrades beyond a certain point, the power level of the mobile is increased. If further power increases do not improve the signal, then a handover is considered. This is the simpler and more common method, but it creates 'smeared' cell boundaries when a mobile transmitting at peak power goes some distance beyond its original cell boundaries into another cell.
The 'power budget' method  uses handover to try to maintain or improve a certain level of signal quality at the same or lower power level. It thus gives precedence to handover over power control. It avoids the 'smeared' cell boundary problem and reduces co-channel interference, but it is quite complicated.
Power control is a fascinating if complex issue. Tim Holliday writes about it in a most lucid fashion:
"The problem of power control for wireless communications has been well studied. Consider the typical setup of a group of mobile devices transmitting data to a base station. These mobile devices are faced with time-varying wireless channels, where the path loss in the channel and interference from other users changes randomly over time. As the path loss or interference increases the probability of a mobile device successfully transmitting data goes down."
"Or put another way, think of trying to hold a conversation with a friend in a crowded room your voice is the mobile transmitter and your friend's ear is the base station. Interference is like the voices of other people in the room; if they are speaking at a high volume your friend will not be able to distinguish your voice. Path loss, on the other hand, results from the appearance of objects (e.g. a vase, table, or door) between you and your friend. Of course, in the context of wireless communications, path loss is caused by much larger objects like hills, buildings, and so forth."
"If the channel conditions (path loss and interference) in the crowded room are poor, you can attempt to communicate with your friend by shouting, or by using very simple words or hand signals. Another option is to wait for everyone else to quiet down or move to another part of the room. This is analogous to what we try to do for wireless devices if conditions are poor, we can raise the transmitter power (start shouting), reduce coding complexity (use simpler words), or withhold transmission until the channel improves."
Tim Holliday, Management Science and Engineering Department, Stanford University. The quotation was from this URL, now dead: http://sll.stanford.edu/projects/i-rite/body_holliday.html
Power control also has a bearing on equalizing, which was written about earlier in this article.