When we talk about analogue or digital, we are referring to the type of transmission of a signal. There are a number of key differences between analogue and digital signal transmission.
An analogue signal (otherwise known as a wave form) is characterised by being continuously variable along both amplitude and frequency. In the case of telephony, when we speak into a handset, our voice is converted into current, or voltage fluctuations. Those fluctuations in current are an analogue transmission of the actual voice pattern.
To transmit an analogue signal effectively, we need to define the frequency in which is operates. In telephony, the usable voice frequency band ranges from approximately 300 Hz to 3400 Hz, and so the network provider (phone company) will allocate a bandwidth of around 4,000Hz for voice transmission.
Because of the limited bandwidth analogue facilities have, they cannot support high-speed data transmission.
Digital signals are much simpler than analogue signals. Instead of a continuous wave form, analogue signals are made up of a series of pulses that represent either one bit or zero bits. Each computer system uses a coding scheme which defines what combinations of ones and zeros make up all the characters in the character set.
The data (ones and zeros) are carried throughout the network depending on whether it is an electrical or optical transmission system.
Transmitting digital signals over an electrical system essentially means that the ones are represented by high voltage and zero bits are represented as low voltage (or nothing at all).
In optical networks, the ones are represented as the presence of light and zeros as the absence of light.