Mu-law algorithmIn telecommunication, a mu-law algorithm (μ-law) is a standard analog signal compression algorithm, used in digital communications systems of the North American digital hierarchy, to optimize, i.e., modify, the dynamic range of an analog signal prior to digitizing. It is similar to the A-law algorithm used in Europe.
The reason for this encoding is that the wide dynamic range of speech does not lend itself well to efficient linear digital encoding. Mu-law encoding effectively reduces the dynamic range of the signal, thereby increasing the coding efficiency and resulting in a signal-to-distortion ratio that is greater than that obtained by linear encoding for a given number of bits.
Source: from Federal Standard 1037C