A software-defined radio does its filtering, demodulating and modulating in digital processing instead of in analog circuits. The antenna signal is converted to numbers and software turns them into audio; on transmit, software builds the signal. An SDR transceiver is a full station radio built this way, and it can show you a whole slice of a band at once.
How it works
Almost all of the radio after the ADC is software: filtering, detection and modulation.
The receive path mixes the signal down to two outputs a quarter-cycle apart (I and Q), samples them, and lets software handle everything else; some designs sample the antenna signal directly. The mechanism is in Direct conversion and SDR receivers, and the numbers behind it in ADCs and DACs and Sampling and the Nyquist limit.
What it gives you
Illustrative. Every signal in the slice is visible at once; the receive filter (amber) picks the one you listen to.
The display shows every signal in the slice at once. You see an open band, a rare station or a pileup, and tune by clicking on it. Filter width, shape and notches are settings rather than hardware, so they change instantly. Digital processing also supports noise reduction and, in some designs, several receivers at once.
Stand-alone or computer-driven
Stand-alone
Computer-driven
Controls
Front panel and screen
Mouse, keyboard, maybe a control surface
Dependence
None
Needs a working computer and software
Flexibility
Fixed feature set
Very flexible and extensible
Remote operation
Possible with extras
Natural, since software already talks over a network
What to look for
Dynamic range. Strong signals across the whole slice reach the converter at the same time. Front-end filtering, converter quality and design choices decide how well it copes; see Sensitivity, selectivity and dynamic range.
Transmit cleanliness. The signal is only as clean as the converters and amplifier. Check how it sounds and what it radiates.
Latency. Digital processing adds a small delay, noticeable in CW break-in or on a slow computer.