Reducing the difference between low-level signals and high-level signals is a valid reason for compression. Singers, for instance, commonly sing their highest notes much louder than their lowest notes. So a compressor can be used to even out the difference. However, a better way of doing this is simply to control the level of the signal with fader automation or clip-based gain.
The most common reason for using compression today is to bring up the low level components of the signal in order to enhance the detail of the sound. This makes almost any instrument or vocal seem more 'present' or 'alive'. Put plainly, it just sounds nicer.
The two most important controls on the compressor are the 'ratio' and 'threshold' controls. The ratio control governs how much compression takes place. For instance if the ratio is set to 4:1, then if the input signal rises in level by a certain amount, the output signal only rises by a quarter of that amount. The threshold control governs the point at which compression 'kicks in'. Below the threshold level there is no compression. Above the threshold, compression takes place at the ratio that is set.
The compressor also has controls for the speed of attack and release, which determine how quickly the compressor responds to changes in signal level.
Designers of compressors, both hardware and software, may attempt to make the most neutral and transparent compressor possible. The aim is that the output signal doesn't sound compressed, even though it is.
But it is more popular these days that a compressor has a sound of its own, often mimicking compressor designs from the past. For instance, the 'variable-mu' compressor uses a vacuum tube with a degree of gain that decreases as the input signal gets louder. This can be emulated in a software plug-in.
The optical compressor uses a lamp or light-emitting diode in conjunction with a light dependent resistor (LDR). As the input signal level rises, the lamp gets brighter. This affects the resistance of the LDR, which is used to reduce the output signal level.
The FET compressor uses a field-effect transistor, the gain of which can be controlled by the level of the input signal.
All of these types of compressor, and others, can be emulated with software plug-ins.
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