This is an encoding/decoding system intended to improve the resolution of CDs (and other digital audio sources) while retaining full CD compatibility. It is said to provide performance equivalent to a PCM system with a resolution of 20 bits, with retaining CD's bit depth of 16. The trick is in re-introducing the old-fashioned compander, albeit carefully implemented in a sophisticated digital fashion. This applies a 'limiter' to the peaks of the signal so that they can be reduced by 6dB, providing an effective two more bits of resolution. It also increases the level of low-level signals in the -45dBFS to -65dBFS range by up to 4dB, giving greater clearance from the noise floor. When played back with a HDCD decoder, the peak limiting and low level boost are reversed (a HDCD switching signal is embedded in the dither noise). HDCD also incorporates a dynamic low pass filter optimised for different types of signals (its operation is also signaled by the dither noise signal) and the dither itself is noise-shaped to provide a very low floor of noise and harmonic distortion below 16,000 Hertz. Read more at the HDCD site.