The greater the number of different possible values you can send, the more data that can be sent per signal. If there are V possible different values or states that can be sent, then log 2 V bits can be sent per signal. More data can be sent in a given time period if a larger number of states can be transmitted. In the diagram above, two bits are sent every signal. Bandwidth is the range of frequencies that can be sent and received.
All hardware has a limited range of frequencies over which it can operate.
The human ear functions between 50Hz to 20KHz, so it has a bandwidth of about 19,950Hz. Filters in the telephone system allow only frequencies between 50Hz and 3050Hz for a bandwidth of 3KHz. This limited bandwidth explains why music does not sound very good over the telephone. The Nyquist formula applies to perfect noiseless channels and gives the absolute maximum speed available. The data rate would be 12K bps while the baud rate would be 6K. Most calculators do not have the base 2 logarithm function which is required to compute this equation.