Resolution refers to the process of converting an analog voltage into a digital value, which a computer can store and manipulate. The number of bits used in this conversion determines the resolution of the device. For example, a 2-bit device can store 4 different values, while a 12-bit device can store 4096 different values. However, the number of bits alone doesn't indicate the quality of the conversion. It's important to consider factors like inherent noise and effective resolution when evaluating a device's performance. Some devices may be advertised as having a high number of bits, but actually provide lower effective resolution.