Simply put, there are plenty of sources out there to learn about how analog and digital audio works. If you want to dive straight into the deep end of audiophilia, I highly recommend Mark Waldrep’s book: Music and Audio: A User Guide To Better Sound. It’s about $20 for the ebook in PDF form.
For those of you who want a simpler and cheaper introduction, I recommend typing “digital audio basics” into your favorite search engine. I can recommend the following article: Digital Audio Basics: Sample Rate and Bit Depth.
For those of you who want answers NOW, think of digital audio in simplified terms like below. There are two things that need to be captured together to be able to reproduce audio.
First, you need the sample rate. The sample rate is the rate at which a system measures an signal and is measured in kilohertz. According to the Nyquist-Shannon sampling theorem, you need a sample rate of twice the frequency that you want to capture. CDs have a sampling rate of 44.1 kHz and as a result, can reproduce frequencies up to 22.05 kHz.
Secondly, you need a bit depth. While the sample rate determines the frequencies that you can capture, the bit depth determines the volume of the frequencies. If you understand binary, you would understand that 16 bits (the bit depth of CDs) has the potential to store 65,536 different values for the amplitude.
Essentially, higher sample rates let you capture higher frequencies, and higher bit depths let you capture audio with a lower noise floor.
What is the noise floor and what causes it? Digital audio cannot “perfectly” capture audio amplitude. No method of audio capture, analog or digital, can. Digital audio samples an analog signal at regular intervals. The amplitude of the samples do not align perfectly with original signal, causing values to be rounded to the nearest value in the last bit. This rounding process is called quantization. This process creates noise and to make a long story short, 16 bit audio allows 96 decibels of dynamic range.
I’ll post my opinions on audio formats and get into DR numbers at a later time.