This device is necessary for connecting a SEGA dreamcast to a computer's modem via phone line. This is so that the dreamcast can get access to the internet. This is used in popular projects such as DreamPi.
It provides power to a dry telephone line allowing phones and modems to be used without a telephone network. This is popularly used with a SEGA Dreamcast to get online, but it can also be useful for connecting two computer modems together or even just two telephones.
In particular this is handy for computers with software modems. Any modem that needs drivers is a software modem. They do not produce their own line voltage. Two soft modems can communicate with each other using this device.