The old sawbone about digital reproduction: "it's all the same 0's and 1's, therefore how can it sound different" is a total piece of nonsense.
Why? Several reasons:
First of all, it's not all the same 0's and 1's. Different hardware devices read digital info differently and with different degrees of accuracy. That's why digital players of all types have "jitter" - or errors in reading the digital information. It's parallel to what we used to call "distortion" in analogue reproduction.
Second, b/c of jitter digital units usually have some type of "jitter correction" built in. This is essentially software written to find and correct "mistakes" in reading the digital info. It includes the "X times oversampling" you see written sometimes in specs. The jitter correction can differ in quality between devices, and the resulting sound will sound different from different devices.
Third, we hear in analogue, not digital. In order to hear music stored digitally, it has to be converted to analogue at some point. This is done by what's called a DAC, or "digital to analogue converter". Almost all devices - from the $20 mp3 player to a $20,000 audiophile CD deck - have some kind of DAC built in. The quality of the DAC chips and the software written for them also varies. In broadly general terms, more expensive devices usually have better digital to analogue conversion, and therefore sound better.
Fourth, there are lots of other factors which affect the sound quality. One is the build quality of the electonics. Better or worse AC/DC conversion, capacitors, board design, op amps and all sorts of other electrical components also effect the end result of the sound.
If you remember early CD's, they were often harsh or metallic sounding. One reason that bad sound is less frequent on today's CD's is that electronics companies have improved jitter correction, and developed better DAC's etc.
For just these reasons, audiophiles with expensive sound systems often will just use the digital output of a CD deck, and feed it to an external, high quality DAC. This change alone can vastly effect the resulting sound. And different DACs clearly give a different sound to the music we hear at the end of the process.
Obviously these differences are less pronounced between inexpensive players than between a cheap player and an expensive component system. However they do exist even in mp3 players, as every producer has to decide which components to use in his/her build in order to hit his/her price point.
For an extreme example, see: Red Wine Audio iMod
- an audiophile modded ipod.
And reviews of it: Red Wine Audio imod - iPod modification review at onHeadphones.com
or Red Wine Imod review
Yes, this is an extreme example, but it makes the point.
And all of that is without getting into upmarket earbuds and headphones.