You need some sort of FXO device, yes.
Really, the options break down to:
For PCI cards, you’re looking at an X100P/X101P clone, or Digium’s TDM400P with an FXO module installed. Digium offers support for the TDM400P, whereas you’re pretty much on your own with an X100P. Any Digium dealer would be happy to sell you a Digium card; you can find the clones on eBay.
For just playing around, a clone card off eBay may meet your needs. For more serious uses, you’ll want better hardware, and the TDM400P is that. It also has the advantage of allowing you to install 4 FXO or FXS interfaces on one PCI card, while you’d need one X100P clone for each FXO.
There are other companies manufacturing FXO cards out there that may work with Asterisk, I just have no experience with them.
The other option is to use something with an FXO port that will register to the network. Sipura’s SPA-3000 ATA is in example of this. Generally speaking, this won’t be quite as flexible as a PCI card, but it will get the job done.
No, you can’t use a modem as an FXO.
Where to Buy
VoIPSupply.com, Digium’s Asterisk Store, The Voxilla Store, a million others… It depends on what you need and what you want to pay.