Schematic Volt

The electret microphone has a current of 200uA which changes by +- 3 uA depending on sound waves. This sets the voltage across R1 to 2V and the voltage across the mic to 4 volts. As the sound hits the mic the current through R1 increases slightly reducing the voltage across the mic. Is that what is happening?

This changing voltage is passed on by the coupling cap, C1 to the base of the transistor, which is biased by R2 & R3 to approx 2V. The voltage across R4 with no signal on the mic will be Vb - 0.7 (drop across vbe), 1.3 volts. As the voltage at b changes R4 will change by the same amount. This change in voltage is seen at the base of the tank circuit. And the signals voltage is increased/decreased. Isnt this what happens in AM? As wouldnt the capacitance need to change in order to get Frequency modulation? And if it was amplitude modulation occuring in the FM spectrum, then how would a radio receiver be able to demodulate the signal?

At this point Im not sure what is happening at the capacitor C3, what is that doing? Is it holding CE at a fixed voltage? And is it along with capacitor C2 considered a bypass capacitor? Or do bypass capacitors need to be connected to ground?