Firstly you want to navigate to your Terminal Velocity game directory by right clicking on the game in your library, selecting properties, then selecting "browse" under the local files tab.
Click on the "Terminal Velocity" folder within this folder and open "TV.conf" with a text editor. Then scroll down to the bottom, change the line ipx=false to ipx=true, and delete the lines TV.exe, cls, and exit.
Now when you start the game up you should be taken to the DOS prompt instead.

At the DOS prompt, type in "IPXNET STARTSERVER <PORT>". Ensure that your chosen port is forwarded to the private IP of the computer hosting the server for UDP protocol. See https://portforward.com/ for port forwarding guides for various types of routers. The default port is 213, which is fine on Windows, but will not work on Unix based OS's without root privileges.

Now type in SETUP to launch the game's configuration tool.
Select network game, select the exact number of players who will be playing,
and then select launch TV to begin searching for players.
Once all of the players are in the game, the game will automatically launch, and you'll get taken to the main menu.

Type in IPXNET CONNECT <ip address> <port> to connect to an ipxnet server, e.g.

Then type in SETUP to launch the config tool and begin searching for players as per the instructions above.

Once in game, select play game from the main menu. One of the players will be designated the host and get taken to the screen where they may select either dogfight or team dogfight mode.
Other players will get taken straight to the ship selection screen. Once all players are ready, press space to commence the game.