How do processing units (chips) work one level deeper than the simple input/processing/output flow?

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How do processing units (chips) work one level deeper than the simple input/processing/output flow?

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It works like one of those old player pianos where you put a roll of paper with holes punched out of it to tell the piano what keys to play when.

Processing chips work the same way except instead of using paper they store the instructions electronically in memory as a series of zeros and ones.

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