Below is a technical explanation produced by the The Columbia Electronic Encyclopaedia of the difference between AM & FM. For the propagation and interception of radio waves, a transmitter and receiver are employed. A radio wave acts as a carrier of information-bearing signals; the information may be encoded directly on the wave by periodically interrupting its transmission (as in dot-and-dash telegraphy) or impressed on it by a process called modulation. The actual information in a modulated signal is contained in its sidebands, or frequencies added to the carrier wave, rather than in the carrier wave itself. The two most common types of modulation used in radio are amplitude modulation (AM) and frequency modulation (FM). Frequency modulation minimises noise and provides greater fidelity than amplitude modulation, which is the older method of broadcasting. Both AM and FM are analog transmission systems, that is, they process sounds into continuously varying patterns of electrical signals which resemble sound waves. Digital radio uses a transmission system in which the signals propagate as discrete voltage pulses, that is, as patterns of numbers; before transmission, an analog audio signal is converted into a digital signal, which may be transmitted in the AM or FM frequency range. A digital radio broadcast offers compact-disc-quality reception and reproduction on the FM band and FM-quality reception and reproduction on the AM band.
In its most common form, radio is used for the transmission of sounds and pictures. The sounds and images are converted into electrical signals by a microphone or video camera, amplified, and used to modulate a carrier wave that has been generated by an oscillator circuit in a transmitter. The modulated carrier is also amplified, then applied to an antenna that converts the electrical signals to electromagnetic waves for radiation into space. Such waves radiate at the speed of light and are transmitted not only by line of sight but also by deflection from the ionosphere.
There are certain differences between AM and FM receivers. In an AM transmission the carrier wave is constant in frequency and varies in amplitude (strength) according to the sounds present at the microphone; in FM the carrier is constant in amplitude and varies in frequency. Because the noise that affects radio signals is partly, but not completely, manifested in amplitude variations, wideband FM receivers are inherently less sensitive to noise. In an FM receiver, the limiter and discriminator stages are circuits that respond solely to changes in frequency. The other stages of the FM receiver are similar to those of the AM receiver but require more care in design and assembly to make full use of FM’s advantages. FM is also used in television sound systems.