Bitrate is defined as the number of data points used to approximate the true wave form. Obviously, the higher the number, the more accurately the wave form is approximated.
For example, the current de facto standard is to encode MP3 at 192 kbps, or 192,000 bits per second. The CODEC takes the bitrate into consideration as it writes each frame to the bitstream. If the bitrate is low, the irrelevancy and redundancy criteria will be measured harshly, and more subtlety will be stripped out, resulting in a lower-quality product. If the bitrate is high, the codec will be applied with leniency, and the end result will sound better. Of course, the file size of the end product corresponds directly with the bitrate.
192 kbps is an example of a constant bitrate (CBR) mode. Constant Bit Rate (CBR) encoding maintains the same bitrate throughout an encoded file. All that means is no matter what, there will always be 192 kbps written into the bitstream. If your audio has moments of silence, it is captured and encoded at that rate, as are areas of very diverse frequencies (that might sound better if encoded to a higher bitrate).
Variable Bit Rate (VBR) is an MP3 encoding method that's used when file size is not an issue. As it's name implies, the bitrate is varied throughout the file. The codec guesses which parts could benefit from more bits per second, and which can use less. The result is a much higher quality file.
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