Learn Russian: Письмо в конверте. - The letter is in the envelope.

In Russian, the present tense of the verb "to be" is almost always left out. You just put the subject (Письмо) and its location (в конверте) together, and the "is" is automatically understood.

Why does the word for envelope end in "-е" (конверте) instead of its normal dictionary form?

The basic dictionary form is конверт. Because we are stating where something is located (inside the envelope) after the preposition в, we must use the Prepositional case. For most masculine nouns like конверт, you form this by adding -е to the end.

Could I use the preposition на instead of в here?

Not if you mean the letter is actually inside! The preposition в means "in" or "inside", while на means "on" (on the surface). If you said на конверте, it would mean the letter is just resting on top of the envelope.

How do we know it translates to "The letter" rather than "A letter"?

Russian does not have article words like "a" or "the". You figure out which one makes sense based on the situation. Since we are describing exactly where a specific item is located, "The letter is in the envelope" is the most natural English translation.