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Derivative is essentially correct, but the fact that it's a "relative" scale is a totally moot point and really doesn't have much to do with what he said.
Storyteller, we had a thread about this before where I explained that dB is a relative scale no matter what equipment you're using. If there's no suffix after the "dB" (like "dBW" or "dBm"), then the reference point is undefined and the signal is usually in reference to whatever the maximum output of the system is.
dB is relative in the analog domain as well. 0 dB at the output of a power amp is a drastically different signal level from 0 dB at the input of a mic preamp. In this respect, there's no difference between digital and analog. Even your monitoring setup makes a difference. If I use passive speakers, I'm putting out something like -20 dB (that's a guess, don't quote me on it) from my power amp to the speakers, but that's a drastically higher power than the 0 dB "line-level" signal which usually gets sent to powered studio monitors. The only "absolute" scale here is the dBA that describes the sound waves coming out of the speaker.
The only significant loss of quality in the digital domain is quantization error, and that only occurs on the way in, or sometimes but rarely on the way out if you have awful DACs. It's quantization error that contributes to the lower SNRs that Derivative is talking about at lower bit depths.
On the way in, let's say that the signal you're recording has a swing of -12 to +12 V. Now let's say you're recording at only 8 bits, that gives you 2^8 or 256 discrete signal levels in the digital domain, which means that the analog signal has to go up by 0.05 V (50 mV or close to 0.5% of the total swing) to register a change in the digital domain. That's actually a fair bit, and if you quantize a sinewave and then convert it back to analog, you get kind of a stepwave on the output which sounds noisy (hissy, really).
16 bits gives you 2^16 or 65536 discrete levels, which corresponds to less than 1 mV of swing, or .002% of the signal. It's so negligible that it's actually lower than the ambient noise floor of most studios, hence the term "CD quality". You're more likely to get noise on your cables than you are through quantization error in 16-bits, and you'll never ever be able to hear quantization error in 24 or 32 bits.
So essentially, the only thing to take home from this is that in modern digital equipment, any loss of quality compared to the analog domain is totally inaudible, even if it's passed back and forth to the digital/analog domains several times in succession.
Analog equipment may colour the sound, produce 2nd-order distortion, have a warmer quality to it, etc. - those are all valid arguments in favour of analog equipment in some circumstances, but there is no significant loss of quality when working with digital equipment at a depth of 16 bits or more.
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