A Modem Chip is a device that modulates signals in a way that encodes data to be received by another modem. It also demodulates signals containing the same type of data to obtain the data being sent from another modem. Modems are used to transfer data to a large variety of physical mediums including cables and RF channels. Dial-up Modems are designed to transfer data over telephone lines within the audio bandwidth of the telephone network.

Modems are usually defined by the way data is encoded in the signal and the bit rate the modem can communicate with. Modulation standards include amplitude-shift keying (ASK), Frequency-shift Keying (FSK, FFSK), phase shift keying (PSK), Quadrature Amplitude Modulation (QAM) and many other types.

PSK encodes the data by modulating the phase of the signal relative to a reference carrier. There are different flavors of this, for example, differential phase shift keying (DPSK). QAM modulates two quadrature (90 degrees out of phase) carriers to produce bit pattern encoded/decoded against a constellation diagram, where location represents a data symbol.

Modem Chips are available to support a large variety of standards and applications. An example of this is a V.32 bis Modem chip. These are used in EFTPOS/EPOS terminals and other telephone-based telemetry systems. They encode and decode data at rates up to 14400 bits/S and can automatically fallback to lower bit rates for poorer quality telephone lines (rate negotiation). Because it is intended to operate with a telephone line, DTMF dial signaling can be incorporated in the device along with hook switch relay control and ring detection.   The control of the physical medium is a common attribute shared by many modems to enable them to interface to, multiplex or even share the medium.

Modems can support error detection and correction, and in many cases have serial interfaces that allow connection to a microcontroller or microprocessor. Broadband ADSL Modems and Wi-Fi Modems need to support high data rates. These can have high-speed serial interfaces such as the PCI Express, and may be implemented as a combo chipset rather than a single chip. Some Modems are interoperable and can be supported by the same hardware chip, for example, Bluetooth and Wi-Fi modems are frequently found to be integrated, and the electrical standard even accommodates for this interoperability.

RF Modems for narrow band signaling channels may have tight requirements to prevent data from spilling into adjacent bands. The transmitted output mask fit within a frequency mask provided by the standard to ensure this. This can require the use of filters and waveform shaping.