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When referring to bits, we are discussing digital audio. 16 bits is a sampling or playback rate. This is analogous to a film playing back at 16 frames per second versus 8 frames per second. Therefore you have more resolution, or detail.

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Update: Actually, the above is not really correct: the number of bits (8, 16, 24...) refer to the sample quantization, the resolution/size of each sample. A sample represents the amplitude of the sound at a given moment, with 8bits you can only represent 256 levels, whereas 16bits gives you 66536 levels, that is better resolution per sample (just like the difference on an image with 256 colors, 8bits, versus 66536 colors, 16bits... or then also 'truecolor'/16Million colors for 24bits).

On the other hand, the sampling rate is measured in hertz and specifies the number of samples per second, with common values being 11, 22, 44 Khz (thousand hertz).

Sample size (bits) and sample rate (hertz) are the two parameters that determine the quality of audio... and the bigger the better.

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