What is a MODEM and what does it do?

The function of a modem is Modulation And Demodulation mean to turn data into a format that can be transmitted via an audio link such as a phone line. A modem at the other side of the connection answers the phone and converts the audio back into usable data. This is why if you lift a phone while the modem is in use there appears to be random noise on the line, this noise is the data in audio form.