What type of wires are commonly used as indoor phone lines? I'm curious to know what is their bandwidth compared to my CAT5 cable that I use with DSL modem.
Most POT (plain-old telephone) installations I have seen use wire pairs that are twisted very loosely (maybe one turn every 50...200 mm) or not at all. There's one pair for each phone. Big cables with many pairs exist, and there's usually no shield.
Depending on the installation (try peeking behind one of your outlets!), you can get anything from two wires sitting loosely in a tube or being taped to wooden beams, ordinary and non-twisted cables to shielded twisted-pair wires lines.
A phone line needs two wires (unused wires may be preset in your installation); a 10/100 Mbit/s network line needs two pairs of wires (= 4 wires).
There is no short answer what bandwidth you can get over an unknown cable, but here's a bit of background information:
A network interface for a CAT5 installation has a defined impedance for the transmitting or receiving differential (two-wire) interface. The goal is to get as much energy as possible from the transmitter of one device (e.g. your DSL modem's PPPoE interface) to the receiver (your notebook's network card). Note that both interfaces contain a receiver and a transmitter, so there's also a differential (two-wire) line from the notebook to the modem, all behind the same modular 8-pin socket (often called RJ-45). This works best if the cable between the two interfaces has the same impedance as the transmitter and receiver. CAT5 is designed just this way: The wire insulation, the distance between the two wires of one pair, the way the two wires are twisted into one pair, the pinout of the connectors etc. are produced very carefully. A phone line, on the other hand, has very loose requirements, so you can have a line where the two wires are close to each other for a while, then form an open loop between them somewhere else, and the wiring behind your sockets may be a pure mess. Varying impedance, crosstalk and bad connections are just some of the bad things that will happen to your signal.
Long story short: If you need a cable for a network interface, it is a very good idea to actually use a CAT-(5, 5e or 6) type of cable. If such a cable is not available, at least try to run the differential signals over those wire pairs that look most like they could act as differential lines - and good luck!
You can have a look at the earlier cables, since cat5 is just a "another telephone cable". And before the Cat5 you had Cat 2 and Cat 3, so a good start could be to look at those.
Wikipedia tells me that "DSL takes advantage of this unused bandwidth of the local loop by creating 4312.5 Hz wide channels starting between 10 and 100 kHz, ... up to 1.1 MHz for ADSL." These channels are allocated (dynamically?) depending on the actual conditions of the line -- not all of the bandwidth up to 1.1 MHz will have sufficiently low attenuation to allow transmission.
For a line within your house, presumably you would have substantially more usable bandwidth than in the long (0.5 - 1 km?) line back to your phone company central office.
In my new house all lines including phone lines were wired for cat 5. Almost no significant cost increase and much more flexibility in using the lines ( and yes Mr X I know this was not the question ).