Dither is important when reducing bit depth to prevent quantization distortion. Dither is a low level noise that provides a noise floor for your track. Dither can also be shaped towards the higher end to remain better hidden. Dither should only be applied at the very last stage of mastering before exporting.
Have a listen to this file. The first section is a sine wave without dither, the second is with dither, and the third section is with shaped dither: http://www.mediafire.com/download/fc2...
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