Each memory cell consists of a particular set of circuits (a small subset of the integrated circuits on a memory chip), and each circuit can be set to either “on” or “off.” Because each circuit has just two states (on and off), they have been equated to 1 and 0, the two possible values of a binary number. Thus, each circuit corresponds to a binary digit, or a bit.
In order to represent the decimal digits (and the alphabet letters and special characters) for processing by the computer, several of these bits (or circuits) must be combined to represent a single character. In most computers, eight bits (or circuits) represent a single character, and a memory cell containing a single character, we know, is called a byte. Thus, eight bits equal one byte in most machines where each memory cell is a byte. A byte can contain one character. Then memory cell 500, for instance, will hold eight circuits or bits. If the settings of these circuits are defined as on-on-on-on-on-off-off-on, this sequence may be defined by the coding scheme to represent the decimal digit 9. If these bits are set to 1111 0001, this may be defined as the decimal digit 1. If these bits are set to 1100 0010, this may be defined as the letter B. We can continue on like this, with each character we wish to represent having a corresponding pattern of eight bits.
Two common coding schemes are in use today. IBM originally developed EBCDIC in the 1950s, and IBM and other vendors still use it. The other common code in use is the American Standard Code for Information Interchange (ASCII), which is employed in data transmission and in microcomputers.
The bottom line is that a coding scheme of some sort is used to represent data in memory and in the other components of the computer. In memory, circuits in a particular cell are turned on and off, following the coding scheme, to enable us to store the data until later. It turns out that circuits are also used to represent data in the control and arithmetic / logical units. In the input, output, and files, the coding scheme is often expressed through magnetized spots (on and off) on some media, such as a disk. In data transmission, the coding scheme is often expressed through a series of electrical pulses or light pulses. In summary, the coding scheme is vital to permit the storage, transmission, and manipulation of data.