This article is from the rec.audio.* FAQ, by with numerous contributions by Bob Neidorff others.
PASC (Perceptual Audio Sub-band Coding) is a data-compression
algorithm. It increases the length of recording that can be
stored in a given number of data bits by eliminating sounds that
the developers' research claims can not be perceived by human
listeners. Its most important component is the omission of
quiet sounds that occur at the same time and near the frequency
of louder sounds. It provides up to a 4x increase in the length
of recordings a given digital medium can hold; this is essential
to allow full-length digital recordings on DCC (and on MD, which
uses a different compression technique). It is not necessary
to translate CD data to analog before compressing it using PASC,
nor the reverse.
It is very difficult to hear any degradation from PASC, but it
is possible, depending on the source and listener. The effect
is not a distinctive noise (like a hiss) nor a consistent
diminution (like a notch in a speaker's response), but a broad,
uncorrelated dropout in a changing collection of sounds that
are masked by sounds that you can hear very easily.
Since it is lossy, repeated PASC recording will cause
progressive loss, and this signal damage may become easily
noticeable. This is a side effect that recording companies
hope will have the effect of discouraging piracy via DCC.
DCC recorders do have digital inputs so can make one perfect
copy of a master, but copy protection prevents digital
duplication of a copy.
For more information on audio compression, consult these
articles (courtesy of Jonas Palm):
R. Veldhuis, M. Breeuwer, R. van der Waal, "Subband Coding of
Digital Audio Signals Without Loss of Quality," IEEE ICASSP,
1989, pp. 2009-2012.
J. Johnston, "Perceptual Transform Coding of Wideband Stereo
Signals," IEEE ICASSP, 1989, pp. 1993-1996.
G. Davidson, L. Fielder, M. Antill, "High-Quality Audio Transform
Coding at 128 kbits/s," IEEE ICASSP, 1990, pp. 1117-1120.
J. Princen, A. Bradley, "Analysis/Synthesis Filter Bank Design
Based on Time Domain Aliasing Cancellation," IEEE Trans ASSP,
Oct. 1986, v. 34 n. 5, pp. 2161-2164.
P. Duhamel, Y. Mahieux, J. Petit, "A Fast Algorithm for the
Implementation of Filter Banks Based On 'Time Domain Aliasing
Cancellation,'" IEEE ICASSP, 1991, pp. 2209-2212.
J. Johnson, "Transform Coding of Audio Signals Using Perceptual
Noise Criteria," Journ. Acoustical Society of America, Feb. 1988,
pp. 314-323.
2nd Draft-Proposed Standard on Information Technology Coding of
Moving Pictures and Associated Audio, document ISO/IEC
JTC1/SC2/WG11 MPEG 90/001, Sept. 1990.
G.Thiele, G. Stoll and M. Link "Low bit-rate coding of high-quality
audio signals. An introduction to the MASCAM system." EBU Review
No. 230
 
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