A very simple analogy might be yelling, then using a megaphone to yell. The megaphone doesn't "amplify" your voice, but directs it a little better so it can be heard further.
Adding this analogy, imagine yelling across a field crowded with people talking as opposed yelling across an empty field. The speech of the other people will interfere with your yelling.
Another analogy might be signalling across a field using colored flags. In all cases you are using reflected light. But the ability to see the distant flag will vary based on the color of the flag. A person holding a green flag standing in front of trees will be difficult to discern compared to someone holding an orange flag. The _carrier_ of your signal--the reflected color of the flag, is different and different carriers are more efficient.
Let's note that the limitation isn't just in the plain copper wire that comes out of your telephone. There's also a limitation in the telephone company facilities. A voice conversation doesn't need much "room" (bandwidth) to be clearly understood. (Notice if you play music over a telephone that sounds terrible at the other end -- that's because the phone doesn't have the bandwidth for the more complex sounds of music compared to voice). Anyway, the telephone company has your voice share space with other voices. While this is fine for voice, it limits data transmission to 56K.
That varies tremendously from customer to customer.
It uses digital. Crisp, to the point. As mentioned above, an orange flag transmits 'better' than a green flag. Both are using the same medium. Digital transmits better and can make better use of a pair of wires.
AFAIK, if you get DSL, you no longer need a second phone line and everything can come over your DSL line. That is, you can talk on the phone and use the computer at the same time, and get faster computer response.
The pricing of services is a function of marketing, not technology. A consumer has to choose the best price/service suited to their needs. Sometimes a bundled package may end up still cheaper than a la carte.
That's not really accurate. Internet costs whatever you want it to cost. If need your response RIGHT NOW, you should get a higher speed connection. If you're doing a lot of work and don't like the long waits, you should get a higher speed connection. If you don't mind slow response time, you can make do as is. Plenty of people do. There are even higher speed connections than DSL, although at some point you're limited by the overall Internet traffic and the response time of remote sites. Indeed, often times what appears as slow connections is actually not related to your own connection, but at intermediate or distant ends.
What is being offered is changing rapidly as technologies change and new equipment is installed. Many cable companies offer service over their lines as well in competition with Bell companies. Some Bell companies are offering "FIOS" which is extra high speed.
Some of us whose modems keep getting fried by lightning are making do with 14.4.