I used to run a BBS from my bedroom when I lived with my parents. I had attached a phone to the same line, and replaced the speaker with a led, so I would know someone was connecting because the led would blink intermittently for a few seconds while it "rang". Not sure if I remember correctly, but I think the BBS software even allowed me to see what they were doing.

I think you remember correctly! A lot of the BBS software would just show what the current user was doing as if it was their screen. I believe from there you could start a chat as the sysop and interact with them, else you kinda just watched.

The few times I ran one (was a sysop on a few, but remotely), I was always a little creeped out that I could see people typing messages, etc. Felt like invading their privacy.