Physical layer - modem
A modem is a device that performs modulation and demodulation for the purpose of transmitting information over a particular type of medium. A modem will convert data from a digital format to a format that is suitable for an analog transmission medium such as a telephone or a radio.
The most common device associated with the term "modem" is the device that was used to connect a computer to the PSTN. Called a dialup-modem, this device modulated data in the form of bits onto an analog waveform that was transmitted over a traditional telephone connection. When received by the telco at their central office, that modulated signal was demodulated into bits once again, and sent along its way over the data network. Similarly, incoming traffic to the connected computer would be demodulated by the modem and presented to the OS and applications as bits of data.
Other technologies that use modulation in a similar fashion are xDSL technologies. Although xDSL terminal equipment is often referred to as a DSL router, it must contain within itself a modem which performs this modulation and demodulation.