Modulation is a prescribed technique of encoding digital or analog signals on a waveform (that is, the carrier signal). Once encoded, the original signal might be recovered by an inverse procedure termed as demodulation. Modulation is executed to adapt the signal to a distinct frequency range than that of original signal. Here is how it flows:
bits → modulator → audio → phone network → audio → demodulator → bits
Therefore the name MODEM in short for modulator/demodulator. The modem is essential since the phone network transmits audio, not data bits. Modem is for compatibility with existing tools.