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Definition from: Wikipedia.com
Quadrature Amplitude Modulation (QAM) is the encoding of information into a carrier wave by variation of the amplitude of both the carrier wave and a 'quadrature' carrier that is 90° out of phase with the main carrier in accordance with two input signals.
Alternately, this can be regarded (using complex number notation) as simple amplitude modulation of a complex-valued carrier wave by a single complex-valued signal.
What this actually means is that the amplitude and the phase of the carrier wave are simultaneously changed according to the information you want to transmit.
QAM is used in NTSC and PAL television systems, where the in-phase and 90° components carry the components of chroma (colour) information. "Compatible QAM" or C-QUAM is used in AM stereo radio to carry the stereo difference information.
It is also used extensively in modems, and other forms of digital communication over analogue channels. In digital applications, the modulating signal is generally quantised in both its in-phase and 90° components. The set of possible combinations of amplitudes, as shown on an x-y plot, is a pattern of dots known as a QAM constellation.
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