Digital Audio
A set of digital audio samples contains data that, when converted into an analog signal, provides the necessary information to reproduce the sound wave. In pulse-code modulation (PCM) sampling, the bit depth will limit signal-to-noise ratio (S/N). The bit depth will not limit frequency range, which is limited by the sample rate.
By increasing the sampling bit depth, quantization noise is reduced so that the S/N is improved. The 'rule-of-thumb' relationship between bit depth and S/N is, for each 1-bit increase in bit depth, the S/N will increase by 6 dB. 24-bit digital audio has a theoretical maximum S/N of 144 dB, compared to 96 dB for 16-bit; however, as of 2007 digital audio converter technology is limited to a S/N of about 124 dB (21-bit) because of real world limitations in integrated circuit design. Still, this approximately matches the performance of the human ear.
Technically speaking, bit depth is only meaningful when applied to pure PCM devices. Non-PCM formats, such as lossy compression systems like MP3, have bit depths that are not defined in the same sense as PCM. In lossy audio compression, where bits are allocated to other types of information, the bits actually allocated to individual samples are allowed to fluctuate within the constraints imposed by the allocation algorithm.
Read more about this topic: Audio Bit Depth