Instead of dividing the virtual and real day into 24 hours and 60 minutes per hour, the Internet Time system divides the day into 1000 ".beats". Each .beat is 1 minute and 26.4 seconds.
Internet Time is based on a new Meridian (as opposed to the Greenwich Meridian). This new Meridian goes through Swatch's office in Biel, Switzerland and is called the BMT Meridian.
Biel Mean Time (BMT) is another invention of Swatch. It is linked up to the Central European Winter/Standard time, which is UTC + 1 hour. When it is Midnight in BMT, the Internet Time is @000 beats, Noon is @500 beats.
As the current hour/minute/second system is already widely adopted, it is very unlikely that the Internet Time system will be able to replace it, even on the Internet. There is already a common time system without time zones and daylight saving time in wide use today - UTC, which should be used instead.