Signaling

The physical layer must generate the electrical, optical, or wireless signals that represent the "1"
and "0" on the media. The method of representing the bits is called the signaling method.

Encoding

Encoding or line encoding is a method of converting a stream of data bits into a predefined
"code”. Codes are groupings of bits used to provide a predictable pattern that can be recognized
by both the sender and the received. In the case of networking, encoding is a pattern of voltage
or current used to represent bits; the 0s and 1s.

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Signaling is the method by which you define what a one or zero is. Encoding is how you use the
1s and 0s to represent information.

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Signaling defines method (voltage, current, RF, light) will be used to represent a 1 or 0. For
example; if I say a 1 is 5 volts and a 0 is 0 volts, this is signaling.

Encoding is how the 1s and 0s will be used. For example; if I say a 1 means "On" and a 0 means
"Off", this is encoding.