HDCDs are still red book audio CDs. They hide codes in lower order bits. On a regular CD player, this isn't audible -- way below normal sound levels. An HDCD equiped decoder recognizes these flags, and uses them to actively alter the playback sound. This includes dynamic range expansion, and some filtering/dithering effects.

HDCDs developer's claim this offers _equivalent_ quality to higher bit rates, and higher bit depths.

Of course, they also claim that it improves playback quality on non-HDCD devices, too.

Does it really sound better?? Like most audio things, there is no clear answer. I have a HDCD player. Although I _think_ I can tell a difference, I probably couldn't in a blind test.