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The most common cause is improper wire usage such as using non-twisted pair within the home (doorbell wire or alarm wire instead of telephone wire). Another common issue is the cable in the outside plant becoming ungrounded or interference from the electric company wires. Below is a great description from Wikipedia.

Twisted pair cabling is a type of wiring in which two conductors (the forward and return conductors of a single circuit) are twisted together for the purposes of canceling out electromagnetic interference (EMI) from external sources; for instance, electromagnetic radiation from unshielded twisted pair (UTP) cables, and crosstalk between neighboring pairs. It was invented by Alexander Graham Bell.

In balanced pair operation, the two wires carry equal and opposite signals and the destination detects the difference between the two. This is known as differential mode transmission. Noise sources introduce signals into the wires by coupling of electric or magnetic fields and tend to couple to both wires equally. The noise thus produces a common-mode signal which is cancelled at the receiver when the difference signal is taken. This method starts to fail when the noise source is close to the signal wires; the closer wire will couple with the noise more strongly and the common-mode rejection of the receiver will fail to eliminate it. This problem is especially apparent in telecommunication cables where pairs in the same cable lie next to each other for many miles. One pair can induce crosstalk in another and it is additive along the length of the cable. Twisting the pairs counters this effect as on each half twist the wire nearest to the noise-source is exchanged. Providing the interfering source remains uniform, or nearly so, over the distance of a single twist, the induced noise will remain common-mode. Differential signaling also reduces electromagnetic radiation from the cable, along with the associated attenuation allowing for greater distance between exchanges.

The twist rate (also called pitch of the twist, usually defined in twists per meter) makes up part of the specification for a given type of cable. Where nearby pairs have equal twist rates, the same conductors of the different pairs may repeatedly lie next to each other, partially undoing the benefits of differential mode. For this reason it is commonly specified that, at least for cables containing small numbers of pairs, the twist rates must differ.

The earliest telephones used telegraph lines, or open-wire single-wire earth return circuits. In the 1880s electric trams were installed in many cities, which induced noise into these circuits. Lawsuits being unavailing, the telephone companies converted to balanced circuits, which had the incidental benefit of reducing attenuation, hence increasing range.

As electrical power distribution became more commonplace, this measure proved inadequate. Two wires, strung on either side of cross bars on utility poles, shared the route with electrical power lines. Within a few years the growing use of electricity again brought an increase of interference, so engineers devised a method called wire transposition, to cancel out the interference. In wire transposition, the wires exchange position once every several poles. In this way, the two wires would receive similar EMI from power lines. This represented an early implementation of twisting, with a twist rate of about four twists per kilometre, or six per mile. Such open-wire balanced lines with periodic transpositions still survives today in some rural areas.

Twisted pair cables were invented by Alexander Graham Bell in 1881.[1] By 1900, the entire American telephone line network was either twisted pair or open wire with transposition to guard against interference. Today, most of the millions of kilometres of twisted pairs in the world are outdoor landlines, owned by telephone companies, used for voice service, and only handled or even seen by telephone workers.

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Q: What causes noise or static on a telephone?
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