Let's assume we have a computer that sends packets to the internet using dial-up connection, and we have access to the analog data on the phone line(we have access to the phone line), how can we make a proper sniff for the data that is being transmitted through?
If it is a PSTN line a simple tape recorder attached to the lines could do the trick. For ISDN I suspect you need a DAC but its also easy, as long as you have physical access to the line.
Any connection using a Telephone line (digital or analogue) is easy to understand for anyone that knows the encoding schema. To realy protect it you should use the same techniques as being used between computers. There we ue an encription layer in between the physical line and the interpretation layer (a.k.a. between the telephone receiver and the physical telephone line) The current default implementation for this is the TLS Protocol, this encrypts everything but the name of the intended 'destination' (so phone number and name)
Bottom Line, if you want to protect your physical line use a TLS connection.