When a sound card is digitizing audio, it is measuring the voltage coming from the audio source many times per second. These measurements are called "samples," and they are saved to the hard drive as a list of numbers. When it is time to play back the sound, the computer can then read the numbers from the hard drive and reproduce the original voltage levels.
The quality of digital audio depends on two factors -- the "sample rate" and the "sample size." Sample rates usually lie between 8 kHz and 44.1 kHz; a sample rate of 44.1 kHz means that the sound is sampled, or measured, 44,000 times per second. Eleven kHz is considered "phone quality," 22.5 kHz is "radio quality," and 44.1 kHz is "CD quality." Digitizing with a high sample rate results in a closer approximation to the original sound with better capture of high-frequency sounds, but it requires more disk space.
Sample size, usually 8 or 16 bits, tells how accurately the voltage is measured. For an 8-bit sample, numbers between 0 and 255 are used to describe voltages. For a 16-bit sample, numbers between 0 and 65,536 are used to describe 0%-100% voltages. Again, using a higher sample size gives a closer approximation to the original sound with smoother transitions between voltages.
CDs use a 44.1-kHz sample rate and a 16-bit sample size; that is 44,000 samples per second, with each sample taking up 16 bits (two bytes). Therefore one second of CD-quality sound would take up 88,000 bytes, or 88K of disk space. This would be doubled if the sound were in stereo.