What is the theory behind Digital Power cords?

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That they absorb noise generated by the crystal oscillator in digital components. I don't have the test gear to verify that electronically, but in my recent evaluation of power cords the digital cords I listened to did sound better than the non-digital cords on my CDP and that's what I bought.

Since the parameter of delivering large amounts of current as in amplification devices is no longer a design concern.
Building power cords for digital equipment and other low current devices, gives the designer a huge amount of creativity to experiment with different materials and configurations.
Changing either the material or configuration can have a dramatic effect on how the equipment performs.
Hence, the goal of power cords that are designed for the types of application you are speaking of, is to provide a steady current power which digital equipment performs best with. Especially when the power has been processed through some type of line conditioner, the last thing you need is a power cord which changes that signal.

Hope that provides a little insight,

Best Regards,
Michael Wolff
Michael Wolff Power Cords