Tunnels can already be set up at the connection level (level 2 of the OSI model). Microsoft and Ascend developed the Point-to-Point Tunneling Protocol (PPTP) early on. Cisco presented a similar protocol with Layer 2Forwarding (L2F). Both manufacturers agreed on a joint effort and the IETF produced the Layer 2Tunnel Protocol (L2TP).
Their main advantage over IPSec is that any network protocol can be used with such a network connection, especially NetBEUI and IPX.
A major disadvantage of the described protocols is the lack of security at the packet level. What's more, these protocols were designed specifically for dial-up connections.