Digital Hybrid systems use an analog FM transmission scheme in combination with digital signal processing (DSP) to enhance the system's audio. Using DSP allows the use of digital techniques impossible in the analog domain such as predictive algorithms, thus achieving a flatter frequency response in the audio spectrum and also further reduce noise and other undesirable artifacts when compared to pure analog systems.

Another approach is to use DSP in order to emulate analog companding schemes in order to maintain compatibility between older analog systems and newer systems.