Contrary to popular belief, baud is not a direct measurement of data transfer speed, but instead it measures how many electrical signals are sent per second. Baud is used to measure the rate of electrical signals, or "signaling elements," for modems, networks, serial cables, and other data transfer mediums.

Some people think that baud and bits per second are equal. For example, they'll say a 28,800 bps modem transmits at 28,800 baud, and act like they know everything. But the fact is, most modems transmit multiple bits of data per baud, so while the the two values are related, they are typically not equal. So the next time your friend says his 56K v.90 modem can transfer data at 56,000 baud, you can kindly tell him that he is incorrect and explain to him the difference between baud and bps.

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Definition from the PC Glossary