Digital Signal Processing (DSP) with 16-bit resolution refers to a digital processing technique that handles signal data using 16-bit words, allowing for precise manipulation of signals in various applications such as audio, image, or communication systems. This methodology involves converting analog signals into digital form and then performing operations like filtering, convolution, and Fourier transforms on the digital representation. The 16-bit resolution provides a balance between processing efficiency and signal quality, making it suitable for numerous technical applications.