The "Telephone Jack" is for the modem. Some of the older Modem software used to allow you to talk on the phone from you Mac via a Mic. To be honest, I have not played with a modem in so long I don't even know what is available. One option you do have though is to use a speakerphone and a Mic and record the convo as a sound file (perhaps through QT if you have QT Pro). It might not be the best quality, but it would work. Get an Apple approved Mic though; many standard PC Mics don't work on Macs.
On a side note, there are some legal issues here. Legally, if you plan on recording the convo, you have to inform all parties involved that the convo will be recorded, and verbally obtain their consent. I assume you live in the US, and this is both a Federal and (in most cases) a state law. Just something to think about.