In networks, modulation is the process of varying one or more properties of a waveform, called the carrier signal, with a signal that typically contains information to be transmitted.
Modulation of a waveform transforms a baseband (Ethernet or wireless) message signal into a passband signal (a passband [a band-pass filtered signal] is the range of frequencies or wavelengths that can pass through a filter without being attenuated). In current networks, modulation takes a digital or analog signal and puts it in another signal that can be physically transmitted.
A modulator is a device that performs modulation of a signal and a demodulator is a device that performs demodulation, the inverse of modulation. We typically just call these modems (from modulator–demodulator), which can perform both operations.
The purpose of digital modulation is to transfer a digital bit stream over an analog bandpass channel. (A good example would be data transmitting over the public switched telephone network, where a bandpass filter limits the frequency range to 300–3400 Hz, or over a limited radio frequency band.) The purpose of an analog modulation is to transfer an analog baseband (or lowpass) signal (for example, an audio signal, wireless network, or TV signal) over an analog bandpass channel at a different frequency.
Analog and digital modulation use something called frequency-division multiplexing (FDM), where several low-pass information signals are transferred simultaneously over the same shared physical network, using separate passband channels (several different frequencies).
The digital baseband modulation methods found in our Ethernet networks, and also known as line coding, are used to transfer a digital bit stream over a baseband channel. Baseband means that the signal being modulated used the complete available bandwidth.
Time-division multiplexing (TDM) is a method of transmitting and receiving many independent signals over a common signal path by means of synchronized network devices at each end of the transmission line so that each signal appears on the line only a fraction of time in an alternating pattern. The receiving end demultiplexes the signal back to its original form.