Modems are used to transmit digital information via analog systems.

The essential functions of a modem are to modulate an analog carrier signal to carry digital information; and to demodulate a similar signal so as to decode the digital information from the analog carrier signal.

In addition to converting digital signals into analog signals, the modems carry out many other functions they are:

• Data Compression: To reduce the amount of time it takes to send data and to cut down on the amount of error in the signal, modems need to employ data compression. For compressing the data, it is sent together in many bits. The bits are grouped together by the device in order to compress them. Data compression techniques reduce the size of the signal needed to send the required data.
• Error Correction: When information is transmitted between modems, it can sometimes be damaged. Thus in error correction process the device checks if the information they receive is undamaged.

To check error correction information is grouped into batches, called frames. Each frame is tagged with a checksum, a small piece of data derived from the information in the frame. Checksum is a method of checking redundancy in the data present on the computer. The device that receives the information, verifies if the information matches with checksums, sent by the error-correcting modem. If it fails to match with the checksum, the information is sent back.

• Flow Control: In the flow control mechanism, the slower modem device signals the faster modem device to pause, by sending a ‘character’. When it is ready to catch up with the faster one, a different character is sent, which in turn resumes the flow of signals. In this way, the two modems can match their speeds.
• Modulated Signals: Essential function of a modem is to create an easily transmitted and decoded signal that allows digital data to be sent from place to place without the loss of information. The most familiar use of modems is to send information over a telephone channel, but modems can be used to relay data over any system that provides a means of transmitting analog signals, including radio and optical networks.