Back when I lived in France, before the advent of cell phones, this was the way you made a phone call in France, and in most of Europe... the pay phone. They were usually located in bars in both France and Italy. Remember, a bar in Italy is a not like a bar here in the States. It's a place to get your morning coffee and sweet pastry before heading off to work... a place to get the news and gossip from your neighbors... a place to get a sandwich or some sort of stuffed pizza for lunch. In the past, it was also where you bought gettoni--a special coin used only in pay phones. Shove the gettoni in the phone, hear the dial tone and dial your number... or was it the other way around? It was always a bit confusing for visitors. I do remember they worked a bit differently than American pay phones.
You may still encounter pay phones in Italy, but nowadays they take credit cards. Be wary of instructions on the phone to make international calls! Even though they look official (perhaps being under plexiglass), they are scams!
Smart phones are a Godsend when traveling through Italy nowadays...
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Pronto: How to Talk on the Phone in Italy