Lets go through some of the basics. Everyone has some type of modem in their house. Whether it be for the internet, telephone line, TV, or any other device that uses a modulated line. A modem is exactly this. A Modulating/De-Modulating mechanism. The function of the modem is to encode a signal so that it can be carried over a form of media from point A to point B and be easily decoded on the other end. Mostly anything that is brought to you by data from the internet is directly transferred through a modem at some point. Originally, the modem started out as a 300 bit/ps piece of hardware looking like this:
Credit to: Jason "Textfiles" Scott for uploading the picture.
This piece of hardware is basically an acoustic coupler, picking up the fluctuations and tones of the signal. What usually would happen would there would be two modems, similar to that of a client and server, however these modems would be called the Originate modem and the other called an Answer modem. However, though you may be thinking that the Originate modem would be the computer, and the the Answer Modem would be the server it is in reality the opposite. The computer was always the answer modem, and the dumb terminal was the Originate modem. These modems would connect to that dumb terminal to gain access to the web, however these days, the modem connects to the Internet Service Provider (ISP) and the ISP connects us to the internet. How this operates is that we have a Point-to-Point Protocol (PPP). Once the information (packet) has been transferred to the modem, it is then transferred to the ISP and to the server. The same steps are required to get the data from the Server back to your computer. There are different types of connections and classifications for modems.
And future implementations of networking technology will most likely also have modems.
To understand how a cable modem works, you need to understand a bit about electricity. A signal operates over an electrical field. In the instance of cable or co-axial connections, the data being sent to the modem and TV receiver are able to be put into the same electrical range. Electrical Range is commonly referred to as Bandwidth. Bandwidth is measurable in Hertz, since the transfer rate is measured in Hertz. The only ways to increase and boost transmission range is to increase the amount of lines or increase the speed on the lines. Due to the standards of coaxial cables, these cables can carry several hundreds of megahertz on a given line. However, bit rate is not solely dependent on frequency.
A Digital Subscriber Line (DSL) modem works on a Plain Old Telephone Service (POTS) infrastructure. This infrastructure is basically using the telephone lines that are already in place for day to day internet services. The modem at the customer premise communicates through provider equipment known as the DSLAM (Digital Subscriber Line Access Multiplexer). The modem negotiates a bandwidth value with the remote end based on cabling conditions. The service generally supports speeds ranging from ~1 to 25 Mbps depending on the standard used. A downfall to DSL, however, is that the signal loses its strength the longer it travels from the provider's office to your equipment. This rating is measured and negotiated between points with values known as "Attenuation" (Signal Loss).
A phone-line modem is what several used in the 90's, and still use today either because cable, DSL, or fiber is not in the area, or as a backup for businesses when their own internet system goes down. One of the earliest forms of Internet Connectivity. Since recent forms of dial-up modems max out their transfer rate at 56kpbs, ISP's have come up with server side compression. This allows images, text, and other media on the requested media to be compressed to allow a higher rate of transfer. How this system works is similar to the older methods of modems. It uses a Line-to-Line connection to initiate and connect to the ISP's hub.
Cellular modems are becoming increasingly widespread as faster and longer range technologies are being developed and implemented. They are a cost effective solution for generally lower-bandwidth demands and convenience as there is no additional cabling required to reach the remote end. Cellular modems come in a variety of formats including laptop 'air cards', router modules and even as an integrated component in cell phones.
Fiber-Optic 'Modems' can also generally be referred to as 'Media Converters'. Their main function is to convert the beams of light received through the fiber into another transport medium such as copper RJ-45, which exist in most computers and networking equipment today.