This circuit will allow you to place a phone call on hold and if you wish to have them listen to music while they are on hold. The circuit operates as follows: The RED wire from the phone jack is typically positive and the GREEN wire is negative or ground. When you want to place a call on hold, close S1 and hang up the handset. The resistor R1 simulates another phone off hook and allows enough
current to pass through to prevent the phone company from disconnecting the call. The resistor R2 and LED provide a visual indication that you have someone on hold ( this is optional )
The capacitor C1 and the transformer provide the interface to a radio or CD player headphone jack. Before you hook up the project to the phone line you must determine the polarity of the line. Place a voltmeter across the red and green wires of the telephone line, there should be about 48 volts
DC positive when the black lead of your meter is connected to the green phone wire. If it is negative 48 volts then reverse the wires.
Source: Electronics Lab