To which port is your telnet session connected? If it's not port 23, you might just be connected to the echo service or something which is designed to do what you're seeing.
Otherwise, try pressing the break sequence (normally Control-], you may need to press return afterward) and do
That should get an affirmative response if telnetd is working. You can try some other things (type "help" at the telnet> prompt to get some ideas).
If the telnet session seems to be working, what application software do you think you're connected to? Is that software working?
If you have access to the remote machine via some other mechanism, try investigating from that end (for example running strace on the user process your session is connected to). Failing that, ask the administrator of the remote machine.
Last, why on Earth are you still using telnet? Did you supply a password to log in? If yes, your password is in danger of being eavesdropped. You should almost certainly use ssh instead.