A method for modulating a downhole telemetry signal uses a fluid pressure pulse generator that generates pressure pulses of multiple pulse heights in a drilling fluid. The method comprises: converting measurement data into a bitstream comprising symbols of a selected symbol set; encoding the bitstream into a pressure pulse telemetry signal using a modulation technique that includes amplitude shift keying, wherein each symbol of the selected symbol set is assigned a pressure pulse having a unique amplitude; and generating pressure pulses in the drilling fluid corresponding to the telemetry signal. Alternatively, the method can comprise a modulation technique that includes amplitude shift keying and phase shift keying and wherein each symbol of the selected symbol set is assigned a pressure pulse having a unique combination of amplitude and phase.