Supposing a computer gets data over telephone wire, it has to send/recieve signals, but how do things work?
Does it use analog signal or a digital bits? How does it send/recieve "1"s and "0"s?
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Over several decades of time analog telephony modem technology has evolved quite a bit. To understand the basics it is essential to understand Frequency Shift Keying, (in my opinion) the mother of all modulation schemes for digital signals.
Essentially what is happening is that a byte is broken up into separate bits, which will be sent one after the other. Next a couple of extra bits are introduced to simplify error detection and synchronization to the signal. If you miss a single bit, you don't want to corrupt the rest of the data stream too.
Unfortunately a telephone line cannot transmit logic levels on its own, the frequency band that it allows is too small (I believe 300-4000Hz) and thus you need a way to change the bits into something that can be transmitted across the telephone line => tones. This is just what FSK does, it changes a logic 0 into a tone of a certain frequency and a logic 1 into a tone of a different frequency.
For example a simple modulation scheme would work like this:
Notice how 1200Hz and 2400Hz are right in the supported bandwidth of the telephone line (300-4000Hz).
At the receiving end it is you do the reverse, if you detect a 1200Hz wave, you shift out a 0 and if you detect two 2400Hz wave, you shift out a 1.
Now you can pick two other frequencies for the communication in the other direction.
To increase bitrate there are many options. You can use multiple frequencies, multiple amplitudes and some schemes can even synchronize on the clock noise of the remote modem.
The MODEM is a critical hardware component in this process. MODEM stands for MODulator DEModulator.
When you send voice down a telephone wire, this is analogue signal (think of waves).
The modem at your PC will speak to another modem at your ISP (internet serive provider), they speak in analogue but can convert this signal into digital data.
If you were to listen to the conversation between two modems, it would sound like screaming. This high frequency noise is the language that the modems use to communicate.
Here's an image of a dial-up modem handshake. As you can see, the handshake is expressed in Frequencies measured in Hz (Larger image here).
Essentially, the modem at your end will hear a series of specific frequencies and know what the other modem is trying to tell it.
Think about morse code, how do we know what the other party is trying to say? beep beep BEEEEP beep beep, it's all sound, but it has meaning when conveyed in a certain way.