OK, though I'm sure most people know how to work a phone jack, some people might not know what it does. Some people might not know what a phone jack is. I doubt that anyone reading this falls into those two categories, but to cover my bases I'll start with that anyway, and then get into the other stuff. To work a phone jack, you stick your telephone cord into the jack hole. Use your jack hole wisely. A phone jack is what connects you to a phone network so you can call your parents to nickel and dime them, or connect via modem to your lame ass dialup provider for internet access.
Oh you'd think this would be a short definition, but you are wrong. So, "What part does my jack play in the scheme of things?", you may ask. Well, jacking is one of the most important parts of the process. Your connection to a telephone network starts right in your own house. (For simplification purposes, I will assume that you live in a single family home on a tree lined street with squirrels and other such shit.) If said rabid squirrels haven't gnawed through, a pair of copper wires goes from a box on the road (most commonly called an entrance bridge) to a box inside your house.
The wires in the box in your house then connect to each phone jack. The wires are usually red and green. The green wire is the common one, and the red wire is what supplies your phone with 6 to 12 volts DC at approx. 30 milliamps (if you really wanted to know). Of course, the voltage going to the phone depends on if it is ringing or not ringing or whether you are on a call. But, alas, it was not always this easy! Back in the day, people had to get jacked manually. Yep, there used to be manual switchboards and operators and the whole shebang.
Back when manual switchboards were used, there was just one pair of copper wires from each house. The wires all ran to a central office which was usually in the center of the town. There would be an operator who sat on his/her ass allllll day in front of a board. There was one jack for every pair of wires that went to the office. Here's where it gets all technical-like. Each jack had a small light above it. A big battery sent current through a resistor that was attached to each pair of wires. If someone picked up their phone to make a call, the "hook switch" would complete a circuit, thus letting current get through wires connecting the house and the office.
When this happened, the light bulb would light up above the corresponding jack on the switchboard. Then the operator person would connect his/her headset into the jack and be like "yo, who you be wantin' to talk to, ho?" (or something like that). After the person said who they wanted to call, the operator would send a signal out so that the other person's phone would ring. When the other person picked up the phone, the operator would connect the people to each other, and that's that.
Now that we are all in the present and don't have that stuff anymore, the operators have been replaced by big giant robots with shoulder mounted lasers. OK, I lied. They (the operators, not the robots) were replaced with an electronic switch. (Boring, isn't it.) When you pick up your phone to give a shout out to your homies, the switch is able to sense that you completed your loop. Then it plays a dial tone so you can tell that both the switch and the phone aren't broken.
Wanna know what goes through your jack and what your phone does in response? Here's some additional information you probably don't ever need to know unless you don't know your phone is ringing and are somehow able to sense Hz and shit: The ring signal that the phone company sends out is an AC waveform. The most common frequency in the US is 20 Hz, and in Europe its 25 Hz (though it can be anything in between 15 and 68, and most of the world has frequencies between 20 and 40). The voltage on your end depends mostly on the loop length and how many ringers you have attached to the line. (If one ringer stopped working, a bad pun about dead ringers would ensue. Oh wait, it did.) The voltage could vary between 40 and 150 volts. The cadence of the ringing (cadence meaning the timing of the ringing and pauses) is may vary between phone companies. The dial tone of a phone is generally a combination of a 350 Hz tone and a 440 Hz tone.
If any of you ph0n3 phr33ks out there find a mistake, feel free to /msg me. This is from memory, classes I've taken, and howstuffworks.com for double checking general facts. Thanks to accipiter for checking it over for me.