First off, I love photos like these. Photos that are so old and archaic that you can practically feel the history coming off of them. This particular image shows what was most likely the very first phone service in the town of Lynnfield. It was located in Roundy's Store, which occupied the site of the present-day Colonial stores on Main Street, across from the Old Meeting House.
A little more on Roundy's store can be found in the Lynnfield historical photo book by Warren Falls. According to Falls, Roundy's Store was also home to the town post office from 1869-1874 and 1915-1936. The main part of the old store was reportedly built as a store in 1871 by Levi Russell, and in 1898, George Roundy and Charles McCarthy purchased the building. The store was then apparently operated by the Worthens until 1982. Safe to say, the phone set up was gone much earlier.
Regarding the photo itself, this appears to be one of those phone setups where you had to pick up the phone and actually tell the operator the number you wished to call. Presumably, the operator would routinely listen in on many calls.