Why is it that they say you shouldn't use the telephone during electrical storms? Is it becuase you can get a shock or a squealing noise?

There are two possible hazards.
1. The external overhead cables could be struck by lightning, which could cause an instantaneous overvoltage to be transmitted right into the handset (unless you are using a hands free or portable set of course), then through you to earth. Some types of important technological equipment which utilise telephone lines for signalling, data transmission, etc, have barrier transformers between the equipment and the telephone line to mitigate any adverse effect of a lightning overvoltage. They may also have additional electrical insulation, and special safety procedures to protect staff.
2. A lightning overvoltage on telephone equipment can easilly give rise to a large spark somewhere on the system. If you are holding the handset tightly to your ear at this time, you could suffer an effect called an 'acoustic shock' due to the enhanced sound effect created by the spark. I actually suffered this once - due to work, not lightning - and temporarilly lost about 40% of my hearing in one ear for several days. Fortunately I fully recovered. I would imagine the acoustic shock from a lightning created spark coudl be far worse.
hope this helps!