Modulation is a prescribed method of encoding digital (or analogue) signals onto a waveform (the carrier signal). Once encoded, an inverse process called demodulation may recover the original signal. Modulation is performed to adapt the signal to a different frequency range than that of the original signal. Hence the name MODEM short for modulator/demodulator. The modem is necessary because the phone network transmits audio, not data bits. The modem is for compatibility with existing equipment.

1. It gives the capability of user-sharing on a single-band. If there was no modulation, for example, the voices of all radio stations would mix together. The reason that none of these stations would be interfered after modulation is because of the orthogonal property of the sin-wave. This simply specifies that as long as carrier frequencies of different modulated signals are different, in frequency domain, they won’t have effect on each other. This effect can be calculated by a simple multiplication of any two modulated signal and integration over one period which results zero.
2. The length of the antenna is directly proportional to the wave-length. The higher the frequency results the lower the wave-length which results smaller size of antenna usage.
3. With the aid of modulation the characteristic of the signal is well matched to the medium. E.g., the bandwidth of the telephone cable is limited between 300 Hz and 4 kHz, therefore the modulation is used to match the baseband signal (data) which can contain lower frequencies (0…300 Hz ) or higher frequencies (4 kHz …) to this limit.
4. Because of the physical specifications of the devices and media of communication, baseband signals require much higher energy in order to be dispatched compared to the similar modulated signal.
5. Some modulations show resistance against noise and other interference eg. FM.
6. Extending the range of transmission. With the aid of modulation a wave can be transmitted over very long distances.
7. When digital data is to be sent over telephone cable, the frequency of the signal can be extremely low which is not matched to the telephone cable therefore using modulation overcomes this limitation.
8. The ordinary TTL (transistor-transistor-logic) digital levels are bounded between 0 and 5. Therefore we have a DC-level in our signal which cannot be directly sent into the telephone cable.

And so on.

The following figure shows a very simple ASK scheme