Tapping the switch-hook is electrically no different than what the dial does: It momentarily opens the circuit. Two momentary openings in quick succession registers at the exchange as the digit "2", six momentary openings registers as "6", and so on with ten momentary openings registering as "0" (except in New Zealand where it is backwards - two openings is "8", six openings is "4", and ten openings is "0"). The dial just does it more conveniently. And if you dial the number of the line you're on, whether with the dial or the switchhook, whether or not there are other extensions on the line, you get a busy signal; that line is off-hook, after all. Nor is it electrically possible for the exchange to ring the other extensions on a line when one of them is off-hook; the low impedance of an off-hook phone will essentially short out the ring voltage. This urban legend relies on the myth that you could call your own phone line by tapping the receiver button this way.
In at least some areas of the U.S., it is possible to dial your home phone number, hang up on the busy signal and get a ring to your own line. The reason the phone company allows this isn't clear, however it has been used by some as a poor-man's home intercom. On a line which does not have caller ID, it could be used to pretend to be calling from outside the house while actually calling from another room. Of course, this scenario can also arise if said home has a phone that also functions as an intercom, two different phone numbers, or to simply call the landline by cellphone.
