What is Software Defined Radio?
Software Defined Radio is a radio system that uses software to perform the functions of signal demodulation as well as perform audio bandpass filtering and notch filtering.  The software also contains the automatic gain control as well as noise blanker functions.

The modes of operation that are demodulated in the SDR Radio System are: AM, SSB, CW, FM, AM Synchronous, C QAM Stereo, and DRM.  Which is an astonishing accomplishment in such a simple radio.
The receiver hardware itself works by splitting the incoming signal from the antenna into two channels that are then phase shifted 90 degrees from each other to create two low frequency i.f. channels that are within the audio passband of the sound card.  The stereo like channels are referred to as the I and Q outputs.  This is known as Quadrature Phase Detection.

The phase shifting of the two helps the software processes to define the upper and lower sidebands and other information in the passband.  The passband is so wide, 24, and to 48 and 96 kHz that the software can detect and display signals above and below the tuned to frequency on a spectrum analyzer display in the software.
CIAO Spectrum DIsplay
of WWCR 3.215 MHz