This takes me back to basic electronics theory.
AM radio is all about Amplitude Modulation. The frequency you tune your radio to (say 1,620 Kilohertz) changes in strength, the varying intensity of the signal is converted to audio information. An AM signal is susceptible to electrical noise from florescent lights, electric motors and lightning, but can be transmitted over great distances. So the audio is determined by how much the signals amplitude changes over time.
FM radio uses changes in the base frequency to transmit audio information. The frequency the radio station transmits on is the base frequency (an example would be 99.1 Megahertz), the station’s transmitter changes the base frequency just a little bit by slowing it down or speeding it up in response to the audio waveform. An FM radio receiver has a very accurate frequency generator inside you can adjust to the base frequency of the station you wish to listen to. The broadcast signal received is compared to the fixed frequency of the radio’s internal frequency generator, the broadcast signals frequency slows down or speeds up based upon the audio being transmitted. The frequency variances of this signal is converted back into an analog audio wavelength.
Digital FM takes this one step further. The changes in frequency happen at a much faster rate but are still applied to the base frequency, but the changes are converted into a stream of ones and zeros instead of analog information. This data stream is the run through a digital processor that decodes the data stream and converts it back into audio information. When there is sufficient data available the signal can transmit additional information; like song titles, artist, lyrics and more.
There is a lot more going on then what I described, hopefully this will give you enough information for your next question.
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