It does this by altering the spectral shape of the error that is introduced by dithering and quantization; such that the noise power is at a lower level in frequency bands at which noise is considered to be less desirable and at a correspondingly higher level in bands where it is considered to be more desirable.
The filter's cutoff frequency can be adjusted by modifying b, the proportion of error from the previous sample that is fed back.
[1] In the case of digital audio, typically the weighting function used is one divided by the absolute threshold of hearing curve, i.e.
Adding an appropriate amount of dither during quantization prevents determinable errors correlated to the signal.
One criticism of the 1-bit converter (and thus the DSD system) is that because only 1 bit is used in both the signal and the feedback loop, adequate amounts of dither cannot be used in the feedback loop and distortion can be heard under some conditions (more discussion at Direct Stream Digital § DSD vs.
[4][5] Most A/D converters made since 2000 use multi-bit or multi-level delta-sigma modulators that yield more than 1 bit output so that proper dither can be added in the feedback loop.
This comes at a cost of non-continuous operation but produces a nice bathtub shape to the spectrum floor.