Modem is a device which is used to connect two computers with the help of ordinary telephone lines. Voltage changes are not tolerated by our ordinary telephone lines. This limitation is overcome by using a modem.
1. It transforms the digital signals into audio signals for transmission over the telephone lines.
2. On receiving the signals the demodulation of the audio signals into digital information will take place.
So, modem is doing both the functions of modulating and demodulating. So, the name modem is derived from the words modulating and demodulating.