It was designed to transfer the contents of a reel of magnetic tape over a leased or dial telephone circuit.
The IBM 7702 was a similar device that could communicate at higher speeds.
[1] The 7701 was the first product introduced in conjunction with IBM's TELE-PROCESSING trademark.
[2] The 7701 communicated using the Synchronous transmit-receive (STR) communications protocol over either private or switched (message service) telephone lines.
[1] The devices used a special incremental magnetic tape drive that was controlled by the STR communications unit.