Formerly AC-3, a perceptual audio coding system based upon transform coding techniques and psycho-acoustic principles.

Frequency-domain processing takes full advantage of noise masking by confining quantization noise to narrow spectral regions where it will be masked by the audio signal. Designed as an emissions (delivery) system, Dolby Digital provides flexible coding of up to 5.1 audio channels at a variety of data rates. In addition, Dolby Digital bit streams carry informational data about the associated audio.