PCM

Pulse Code modulation as a method to digitize sound has been proposed by  Alec Reeves in 1937. It had to wait until the transistor and the IC become available at low cost before this method was successfully introduced in the consumers market. Almost all of today's digital audio is PCM audio.

The principle is simple, the analogue signal is measured at uniform intervals. The magnitude of the signal is translated into a numeric value and as it is a number, it could be represented in bits.

 

More about sampling can be found here.