First of all, let me state that what you are doing is against the law.
The fastest one to answer is yes, the phone cable might be acting as an antenna for the signal. This is not the norm, most properly built notebook will not provide this same effect.
As for signal strength, there are several factors in play, but I will only list a couple of them (I am assuming that you are using a notebook/laptop).
1. The wireless circuitry for your laptop is not powerful to amplify the received signal, which is already weak.
2. The distance from the source also affects the connection.
3. The number of obstacles in the path of the signal will also affect the strength negatively.
4. Atmospheric pressure also has something to do with it.
5. If the source signal is not properly powered, the signal strength will fluctuate.
6. If the neighbor knows what he/she is doing, he might be baiting you (that's what I usually do).
Whether the neighbor is using the network or not, should not affect the signal strength for a commercial grade wireless source, but anything goes with the cheap stuff that are sold in consumer stores.
Here read about illegal use of a wireless network
As for baiting, it's got nothing to do with the signal strength, but it's more to mess around with others.
e.g. I open my wireless access and setup my network to route users to a honeypot or to a specific server that I have setup.
Anybody who connect to my open network will have all of their internet usage go through my systems and me being able to look at what they are doing. I can allow some website, but not others, basically do what I want with their connection.
You will only see the fun in it, if you can and know how to do it.