Before considering how a stereo works, it's important to become familiar with the components of a stereo system. A stereo system must contain an audio source, such as a CD player or MP3 player. The next component in the stereo is a preamplifier which reads and decodes audio information sent from the source to the amplifier. The amplifier increases the power of the signal to properly drive the speakers. Finally, the speakers convert the electrical audio signal to sound. In some systems, the amplifier is combined with the preamplifier in devices like receivers or integrated amplifers.
Your audio source reads recorded audio information from a digital or analog recording and then sends the information in an electrical signal via audio cable. This information was recorded onto the medium in a process that is essentially the reverse of a stereo playing music. Depending upon the source and cable that you use, this may be a digital or an analog signal.
The preamplifier serves as the brain and control center of your stereo. It reads the signal, breaks it down into appropriate channels (i.e. left and right for 2-channel audio), increases the voltage of the signal slightly from a source like a phonograph which has a very weak input signal, and then sends it to the amplifier(s).
The amplifier(s) adds significant power to the signal. The signal sent from the preamplifier is far too weak to effectively drive the speakers and vibrate the coil so that you can hear sound. It's the amplifier's job, therefore, to boost the power of the signal so that it can properly drive the speaker cones creating the sound that you enjoy.
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A traditional speaker uses several drivers. Each driver contains a stationary magnet, an electromagnetic coil and a cone or dome. The electric signal sent from the amplifier is an AC or alternating current signal. Basically, this means that the current switches directions regularly. An alternating current running through a wire coil creates a magnetic field that is constantly reversing polarity. As the polarity of the coil reverses, it causes a constant shift between attraction and repulsion with the stationary magnet. The electric voice coil is constantly oscillating because of this magnetic force and in turn vibrates the cone or dome. The vibration of the cone or dome vibrates air molecules, which become the vessel by which sound is delivered to your ears. Each driver is responsible for its own frequency range (tweeter-high frequency, woofer-low frequency, mid-range driver-mids). Crossover circuitry breaks down the signal when it enters the speaker sending audio information in each frequency range to its respective driver.