What's going on with my home network/phone lines?

This is a little curiosity of mine that I’m trying to sort out, and I can’t for the life of me work out what is going on. Prepare for a captivating read:

Here’s the deal: We have a room in our basement which was built 3 years after the main part of the house. It was built specifically to be a home cinema, so the walls are full of AV, S-Video and VGA cables for projectors and such. This room has 2 ethernet ports on either side of it. Someone has written a phone number on each of the ports.

The ports are not connected to each other, I have tested this by plugging two Macbooks in on either side and they don’t connect to each other, which suggests the ports are not connected.

I am hoping that there is some way to connect the downstairs room to our upstairs router, as there is no signal down in the room. The router is in a room with an Ethernet plug in the wall- which sounds perfect.

Here’s where things get strange: There are only 3 ethernet ports in our house. None of them are connected to each other (using the same test with the Macbooks as before), the only one upstairs is labeled ‘ADSL’ and runs from the wall plug to our home alarm system (I’m assuming this line ran to the off-site monitoring company).
But, beside the upstairs ethernet port is a phone line, which is in use as an internet connection to our router. However, at the controls for the home alarm system, this phone line turns into an ethernet connection via an ivory colored converter labelled ‘Exicom TBA8’. The ethernet cable then disappears under the floor and is not seen again. It has to be connected to our home’s phoneline, but why would it turn into ethernet?

I have 3 questions:

1. Why would it turn into Ethernet?
2. Is there something wrong with my method?
3. Can you think of any reason for these circumstances beyond complicated stupidity.