M/S stereo coding transforms the left and right channels into a mid channel and a side channel, hence the name. The mid channel is the sum of the left and right channels, or L + R. The side channel is the difference of the left and right channels, i.e., L − R. Unlike intensity stereo coding, M/S coding retains the audio perfectly and does not introduce artifacts by itself. It is a special case of transform coding. However, when used in conjunction with a lossy form of compression, artifacts can become apparent.
This kind of coding is also sometimes known as matrix stereo, and is utilized in many different forms of audio processing and recording equipment including broadcasting. It is therefore not limited to digital systems, and can even be created with passive audio transformers or analog amplifiers.
One example of the use of M/S stereo is phonograph records, where the mid channel (L + R) is cut into the groove horizontally, and the side channel (L − R) is cut vertically. Another use is in FM stereo broadcasting, where L + R modulates the carrier wave and L − R modulates a subcarrier.