PCM consists of 3 main steps: sampling, quantization, and binary encoding. Sampling converts an analog signal to digital pulses by taking amplitude measurements at regular time intervals. Quantization maps the infinite amplitude values between limits to a finite set of values. Binary encoding assigns binary code values to each quantization level. The sampling rate must be at least twice the highest frequency in the signal according to Nyquist's theorem. Quantization introduces error and noise that can be reduced by using more quantization levels, though this increases the bit rate. PCM is widely used in digital communications and its variants like ADPCM and DPCM aim to further compress signals.