How to interpret telephone line for Arduino?
In order to interface to the phone line you are looking for a SLIC (subscriber line interface circuit).  There are discrete designs and ICs like the ISL5585 that implement the interface.  

Capturing DTMF on an arduino is going to be a challenge (code link below).  If you use an ARM instead (several ARM processors are supported by Arduino or you could use MBED/etc).  Here is an app note on the one algorithm you can use to detect the tones: https://www.silabs.com/documents/public/application-notes/an218.pdf

An implementation in C which could be used with Arduino or MBED can be found here:
http://phrack.org/issues/50/13.html

Here is one for the AVR:
https://github.com/PaulStoffregen/AVR_DTMF/blob/master/dtmf.c