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Audio level compression, also called dynamic range compression, volume compression, compression, limiting, or DRC (often seen in DVD player settings) is a process that manipulates the dynamic range of an audio signal. Compression is used during sound recording, live sound reinforcement, and broadcasting to improve the perceived volume of audio. A compressor is the device used to create compression.
A compressor reduces the dynamic range of an audio signal if its amplitude exceeds a threshold. The amount of gain reduction is determined by a ratio control. For example, with a ratio of 4:1, an increase of 4 dB will be needed to increase the output signal level by 1 dB over the threshold. Contrast this with the complementary process of an expander, which increases the dynamic range of a signal. 
A compressor accomplishes its task of reducing dynamic range by using a variable-gain amplifier to reduce the gain of the signal. This is typically carried out in analog systems by using a voltage controlled amplifier which has its gain reduced as the power of the input signal increases. Optical compressors use a light sensitive diode (an optocoupler) to detect changes in signal gain. This vintage technique is believed by some to add smoother characteristics to the signal, because the response times of the light and the diode soften the attack and release.
An alternative technique is to insert the compressor in a parallel signal path. This is known as parallel compression, and can give a measure of dynamic control without significant audible side effects.
Currently, digital signal processing techniques are commonly used to implement compression via digital audio editors, or dedicated workstations.
A limiter is a compressor with a higher ratio, and generally a faster attack time. There is no absolute consensus on what ratio constitutes limiting as compared with compression, but most engineers would consider anything with a ratio greater than 10:1 as limiting. Compression and limiting are no different in process, just in degree and in the perceived effect. Engineers sometimes refer to soft and hard limiting which are differences of degree. The "harder" a limiter, the lower its threshold and the higher its ratio.
Brick wall limiting effectively ensures that an audio signal never exceeds the amplitude threshold that is set. In practice, this is a ratio of 50:1 or greater. Sometimes it is labeled as ∞:1 The sonic results of more than momentary and infrequent hard limiting are usually characterized as harsh and unpleasant; thus it is more appropriate as a safety device in live and broadcast applications than as a sound-sculpting tool.
Some modern consumer electronics devices incorporate limiters, such as AVLS (Automatic Volume Limiter System), found on certain Sony audio products and the PlayStation Portable.
Side-chaining uses the dynamic level of another input to control the compression level of the signal. This is used by disc jockeys to lower the music volume automatically when speaking, for example (known as ducking). A frequency-specific compressor (often used for de-essing) may be constructed by feeding a high-pass filtered copy of the original signal into the side-chain input of the compressor so that volume reduction on the original signal only takes place when a specific frequency is present in large amounts (such as sibilant sounds that tend to overdrive preemphasized media such as phonograph records and FM radio). Another use of the side-chain in music production serves to maintain a loud bass track, while still keeping the bass out of the way of the drum when the drum hits.
Multiband compressors are compressors that can act differently on different frequency bands. It is as if each band has its own compressor with its own threshold, ratio, attack, and release. They are primarily an audio mastering tool, but their inclusion in digital audio workstation plug-in sets is increasing their use among mix engineers. Hardware multiband compressors are also commonly used in the on-air signal chain of a radio station, either AM or FM, in order to increase the station's apparent loudness without fear of overmodulation. Having a louder sound is often considered an advantage in commercial competition. However, adjusting a multiband output compressor of a radio station also requires some sense of style and a good pair of ears. This is because the constantly changing spectral balance between audio bands may have an equalizing effect on the output, by dynamically modifying the on-air frequency response.
Compressors usually have controls to set how fast the compressor responds to changes in input level, known as attack, and how quickly the compressor returns to no gain reduction once the input level falls below the threshold, known as release. Because the loudness pattern of the source material is modified by the compressor it may change the character of the signal in subtle to quite noticeable ways depending on the settings used.
A second control on a compressor is hard/soft knee. This controls whether the bend in the response curve is a sharp angle or has a rounded edge. A soft knee reduces the audible change from uncompressed to compressed, especially for higher ratios where the changeover is more noticeable. 
An audio engineer might use a compressor in a subtle way in order to reduce the dynamic range of source material in order to allow it to be recorded optimally on a medium with a more limited dynamic range than the source signal, or they might use a compressor in order to deliberately change the character of an instrument being processed.
Engineers wishing to achieve dynamic range reduction with few obvious effects might choose a relatively low threshold and low compression ratio so that the source material is being compressed very slightly most of the time. To deliberately soften the attack of a snare drum, they might choose a fast attack time and a moderately fast release time combined with a higher threshold. To accentuate the attack of the snare, they might choose a slower attack time to avoid affecting the initial transient. It is easier to successfully apply these controls if the user has a basic knowledge of musical instrument acoustics.
Because the compressor is reducing the gain (or level) of the signal, the ability to add a fixed amount of make-up gain at the output is provided so that an optimum level can be used.
Compression is often used to make music sound louder without increasing its peak amplitude. By compressing the peak (or loudest) signals, it becomes possible to increase the overall gain (or volume) of a signal without exceeding the dynamic limits of a reproduction device or medium. The net effect, when compression is applied along with a gain boost, is that relatively quiet sounds become louder, while louder sounds remain unchanged.
Compression is often applied in this manner in audio systems for restaurants, retail, and similar public environments, where background music is played at a relatively low volume and needs to be compressed not just to keep the volume fairly constant, but also in order for relatively quiet parts of the music to be audible over ambient noise, or audible at all.
Compression is sometimes used to reduce the volume of one audio source when another audio source reaches a certain level; see Side-Chaining above.
Compression can also be used on instrument sounds to create effects not-primarily-focused on boosting loudness. For instance, drum and cymbal sounds tend to decay quickly, but a compressor can make the sound appear to have a more sustained tail. Guitar sounds are often compressed in order to obtain a fuller, more sustained sound.
Compression is also often used in music production to make performances more consistent in dynamic range so that they "sit" in the mix of other instruments better and maintain consistent attention from the listener. Vocal performances in rock music or pop music are usually compressed in order to make them stand out from the surrounding instruments and to add to the clarity of the vocal performance.
A compressor can be used to reduce sibilance ('ess' sounds) in vocals by feeding the compressor with an EQ set to the relevant frequencies, so that only those frequencies activate the compressor. If unchecked, sibilance could cause distortion even if sound levels are not very high. This usage is called 'de-essing'. 
Compression is used in voice communications in amateur radio that employ SSB modulation. Often it is used to make a particular station's signal more readable to a distant station, or to make one's station's transmitted signal stand out against others. This occurs especially in pileups where amateur radio stations are competing for the opportunity to talk to a DX station. Since an SSB signal's amplitude depends on the level of modulation, the net result is that the average amplitude of the signal and hence average transmitted power would be stronger than it would be had compression not been used. Most modern amateur radio SSB transceivers have speech compressors built in.
Compression is also used in land mobile radio, especially in transmit audio of professional walkie-talkies and in remote control dispatch consoles.
Compression is used extensively in broadcasting to boost the perceived volume of sound while reducing the dynamic range of source audio (typically CDs) to a range that can be accommodated by the narrower-range broadcast signal. Broadcasters in most countries have legal limits on instantaneous peak volume they may broadcast. Normally these limits are met by permanently inserted hardware in the on-air chain (see multiband compression above).
The same recording can have very different dynamics when heard via AM, FM, CD, or other media (although frequency response and noise are large factors as well).
In recent years (as of 2006), record companies have been increasing the overall volume of commercial albums (particularly rock music and pop music) by using higher and higher degrees of compression during mastering, sometimes impacting sound quality. This phenomenon has been referred to as the "loudness war".
Most television commercials are compressed heavily in order to achieve near-maximum perceived loudness while staying within permissible limits.
A compressor is sometimes used to reduce the dynamic range of a signal for transmission, to be expanded afterwards. This reduces the effects of a channel with limited dynamic range. See Companding.
Gain pumping, where a regular amplitude peak (such as a kick drum) causes the rest of the mix to change in volume due to the compressor, is generally avoided in music production. However, many dance musicians use this phenomenon in a creative way, causing the mix to alter in volume rhythmically in time with the beat.
Some software audio players support plugins which implement compression. These can be used to increase the perceived volume of audio tracks, or to even out the volume of highly-variable music (such as classical music, or a playlist spanning many music types). This improves the listenability of audio when played through poor-quality speakers, or when played in noisy environments (such as in a car or during a party). Such software may also be used in micro-broadcasting or home-based audio mastering.
Available software includes:
The Winamp plugins can also be enabled for Windows Media Player and other players via ffdshow.
To achieve volume-compressed playback on devices other than computer-based audio players, files may need to be processed via the above software then output as wavs, mp3s, or other audio formats.