What device modulates signals to encode digital information and demodulates signals to decode the transmitted information?

The correct answer is a modem, which stands for modulator-demodulator. This device performs two critical functions essential for digital communication.

Firstly, modulation is the process of converting digital data into an analog signal suitable for transmission over various media, such as telephone lines or radio waves. This allows digital information, which is in binary form, to be sent over channels that primarily handle analog signals.

Secondly, demodulation is the reverse process, where the modem receives the analog signal and converts it back into digital data that can be understood by computers or other digital devices.

Thus, a modem serves as a bridge between digital devices and the analog transmission environment, making it a vital component in telecommunications and internet connectivity. Other devices like bridges, routers, and switches play different roles in network communication but do not perform both modulation and demodulation tasks.