if tones were played can the arduino detect the amplitude and frequency of thowse tones if it had a external better analog to digital converter? If someone has done this what did they use how about phone systems?
For the way phone systems do it look up DTMF en / de coders.
Old school method for touch-tone decoding (not sure if this chip is still available or not?):
I thank you can something like it but more complex decode lets say the different tones from a piano? more than 2 tones from a phone?
That's somewhat involved and you need to look up FFT, or the Goertzel algorithm. There are some threads about FFT here, this is one: http://www.arduino.cc/cgi-bin/yabb2/YaBB.pl?num=1250020826