LINE connects to the PSTN or your provider of standard telephone services, not a phone. That way, you can make calls to and receive calls from the PSTN on the phone(s) connected to the PHONE port. Of course, the OBi lets you do much more, like bridging a PSTN call to a SIP provider and so on.
If you want all the phones in you house to be connected to the OBi, you'd need to make sure your house wiring is disconnected from the PSTN (or from whatever is providing standard telephone services). Then, you'd connect the house wiring to the OBi through the PHONE port. The LINE port would go to your provider of standard telephone services, if you have one (basically, what the house wiring used to be connected to). Just make sure not to hook up too many phones, which could exceed the OBi's REN capacity.