"SACD audio is stored in a format called Direct Stream Digital (DSD), which differs from the conventional PCM used by the compact disc or conventional computer audio systems.
DSD is 1-bit, has a sampling rate of 2.8224 MHz, and makes use of noise shaping quantization techniques in order to push 1-bit quantization noise up to inaudible ultrasonic frequencies. This gives the format a greater dynamic range and wider frequency response than the CD. Promotional materials about SACD supplied by Philips and Sony suggest that the system is capable of delivering a dynamic range of 120 dB from 20 Hz to 20 kHz and an extended frequency response up to 100 kHz, although most currently available players list an upper limit of 80–90 kHz.
The process of creating a DSD signal is conceptually similar to taking a 1-bit delta-sigma analog-to-digital (A/D) converter and removing the decimator which converts the 1-bit bitstream into multibit PCM. Instead, the 1-bit signal is recorded directly and in theory only requires a lowpass filter to reconstruct the original analog waveform. In reality it is a little more complex, and the analogy is incomplete in that 1-bit sigma-delta converters are these days rather unusual, one reason being that a 1-bit signal cannot be dithered properly: most modern sigma-delta converters are multibit.
Because of the nature of sigma-delta converters, one cannot make a direct comparison between DSD and PCM. An approximation is possible, though, and would place DSD in some aspects comparable to a PCM format that has a bit depth of 20 bits and a sampling frequency of 192 kHz. PCM sampled at 24 bits provides a (theoretical) additional 24 dB of dynamic range. Due to the effects of quantization noise, the usable bandwidth of the SACD format is approximately 100 kHz, which is similar to 192 kHz PCM.
Because it has been extremely difficult to carry out DSP operations (for example performing EQ, balance, panning and other changes in the digital domain) in a 1-bit environment, and because of the prevalence of studio equipment such as Pro Tools, which is solely PCM-based, the vast majority of SACDs — especially rock and contemporary music which relies on multitrack techniques — are in fact mixed in PCM (or mixed analog and recorded on PCM recorders) and then converted to DSD for SACD mastering.
To address some of these issues, a new studio format has been developed, usually referred to as "DSD-wide", which retains standard DSD's high sample rate but uses an 8-bit, rather than single-bit digital word length, but still relies heavily on the noise shaping principle. It becomes almost the same as PCM (it's sometimes disparagingly referred to as "PCM-narrow") but has the added benefit of making DSP operations in the studio a great deal more practical. The main difference is that "DSD-wide" still retains 2.8224 MHz (64Fs) sampling frequency while the highest frequency in which PCM is being edited is 352.8 kHz (8Fs).
The "DSD-wide" signal is down-converted to regular DSD for SACD mastering. As a result of this technique and other developments there are now a few digital audio workstations (DAWs) which operate, or can operate, in the DSD domain, notably Pyramix and some SADiE systems.
Note that high-resolution PCM (DVD-Audio, HD DVD and Blu-ray Disc) and DSD (SACD) may still differ in terms of fidelity at high-frequencies since DSD, owing to its high sampling frequency, does not show the ringing effects that PCM shows with certain types of signals when sharp reconstruction filters are employed, but instead it shows constant high levels of noise at the same frequencies this ringing would show in 192 kHz PCM. On the other hand, DSD's dynamic range decreases quickly at frequencies over 20 kHz due to the use of strong noise shaping techniques which push the noise out of the audio band resulting in a rising noise floor just above 20 kHz. PCM's dynamic range, on the other hand, is the same at all frequencies. (Some high-end SACD players employ an optional low-pass filter set at 30 kHz for compatibility and safety reasons, suitable for situations where amplifiers or loudspeakers can't deliver an undistorted output if noise above 30 kHz is present in the signal.)"