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In digital audio, bit depth describes the number of bits of information recorded for each sample. Bit depth directly corresponds to the resolution of each sample in a set of digital audio data. Common examples of bit depth include CD audio, which is recorded at 16 bits, and DVD-Audio, which can support up to 24-bit audio.

Technically speaking, bit depth is only meaningful when applied to pure PCM devices. Non-PCM formats, such as DSD or lossy compression systems like MP3, have bit depths that are not defined in the same sense as PCM. This is particularly true for lossy audio compression, where bits are allocated to other types of information, and the bits actually allocated to individual samples are allowed to fluctuate within the constraints imposed by the allocation algorithm. Recently, many lossy formats such as DTS and WMA Pro have been promoted as 24-bit. However, this is not correct.[citation needed] A lossy file will not actually contain 24 bits worth of information per sample, but is actually a file that was originally mastered at 24 bits and then compressed.

[Can't get enough? You can follow this extremely-interesting thread and read more at] http://en.wikipedia.org/wiki/Audio_bit_depth