They compress the data and send it as packets with error
correction. Then the receiving end receives them and decompresses the
data. All the while both ends are monitoring line quality and
negotiating the next transmission.

Pretty much what I described, but in more elaborate detail.

Compression would be a form of simplification to transmit while error
correction would help to keep anomolies in the data strem in check. Sending
them in packets would help to make the transmission more robust as opposed to
sending it in a linear fashion.

In other words, it simplifies the data for transmission and has redundant
corrections and a packet strategy to help keep the data flowing reliably.

But, again, the transmission has to be modulated in a carrier to allow it be
sent through the phone lines, which were meant for analogue transmission
although several A/D-D/A conversion steps can take place in the interim between
two telephone devices (which is one of the many causes of bottlenecking in
dial-up modem connection speeds).

Where a softmodem falls short is in
the lack of its own cpu and a software driver must hog the main cpu to
emulate the modem's cpu.

Of course.

In a very powerful pc this isn't usually too
bad but in general mostly all other running programs suffer.

The biggest problem with a softmodem, if you're running it on a very powerful
computer with plenty of overhead like extra RAM, is that the emulator program
may be sloppily written. This has been the case with a whole bunch of
"bargain" softmodems that I've seen.

No software can beat a hardware system. Especially not a winmodem.

No argument here. This understanding was the primary reason why I replaced my
Best Data Mach2 with a U.S. Robotics PerformancePro a few months ago when I was
able to.

Although the overhead gains were mainly negligible since I'm running a 2.08 GHz
Athlon XP with 1 gig of RAM onboard, I don't get blue screen warnings anymore
when I surf the net. The drivers for my old Best Data were probably badly
written.

And as for hardware modems, I'd recommend only 3Com/U.S. Robotics, which
generally use Texas Instruments solutions, or modems with an Agere (formerly
known as Lucent) solution. - Reinhart