It's called 'Frequency Shift Keying'. It's a method for bi-directional serial communication using the combined mic/headphone jack in an iPhone. It's similar to old telephone modems in practice; converting serial data to audible tones on the left and right channel and then back into data on the receiving end. It's done this way because Apple does not allow your average Joe access to all the hardware data ports. That part at least is plausible.