The baud rate of a data communications system is the number of symbols per second transferred. A symbol may have more than two states, so it may represent more than one binary bit (a binary bit always represents exactly two states). Therefore the baud rate may not equal the bit rate, especially in the case of recent modems, which can have (for example) up to nine bits per symbol.

For example, a Bell 212A modem uses Phase Shift Keying (PSK) modulation, and each symbol has one of four phase shifts (of 0(deg), 90(deg), 180(deg), or 270(deg)). Since it requires two bits to represent four states (00, 01, 10, and 11), the modem transmits 1,200 bits/s of information, using a symbol rate of 600 baud.

Usually the baud rate of a modem will not equal the bit rate and is of no interest to the end user--only the data rate, in bits per second, is.

Therefore in referring to the data rate of a modem, use bits/s (or kbits/s, etc.), not baud rate.

Named after J. M. Emile Baudot (1845-1903), who was a French telegraph operator, who worked out a five-level code (five bits per character) for telegraphs? It was standardized as International Telegraph Alphabet Number 2, and is commonly called Baudot (and is a predecessor to ASCII). Since 2^5 is only 32 and the uppercase letters, numbers, and a few punctuation characters add to more than that, Baudot uses Shift In and Shift Out characters (analogous to how the Caps Lock key on a PC keyboard reduces the number of keys needed by enabling each letter key to represent two characters).

Baud means "state changes of the line per second"

Baud Versus Bits Per Second
The baud unit is named after Jean Maurice Emile Baudot, who was an officer in the French Telegraph Service. He is credited with devising the first uniform-length 5-bit code for characters of the alphabet in the late 19th century. What baud really refers to is modulation rate or the number of times per second that a line changes state. This is not always the same as bits per second (BPS). If you connect two serial devices together using direct cables then baud and BPS are in fact the same. Thus, if you are running at 19200 BPS, then the line is also changing states 19200 times per second. But when considering modems, this isn't the case.

Because modems transfer signals over a telephone line, the baud rate is actually limited to a maximum of 2400 baud. This is a physical restriction of the lines provided by the phone company. The increased data throughput achieved with 9600 or higher baud modems is accomplished by using sophisticated phase modulation, and data compression techniques.

Communicating By Bits
Once the start bit has been sent, the transmitter sends the actual data bits. There may either be 5, 6, 7, or 8 data bits, depending on the number you have selected. Both receiver and the transmitter must agree on the number of data bits, as well as the baud rate. Almost all devices transmit data using either 7 or 8 data bits.

When notice that when only 7 data bits are employed, you cannot send ASCII values greater than 127. Likewise, using 5 bits limits the highest possible value to 31. After the data has been transmitted, a stop bit is sent. A stop bit has a value of 1 - or a mark state - and it can be detected correctly even if the previous data bit also had a value of 1. This is accomplished by the stop bit's duration. Stop bits can be 1, 1.5, or 2 bit periods in length.

The Parity Bit
Besides the synchronization provided by the use of start and stop bits, an additional bit called a parity bit may optionally is transmitted along with the data. A parity bit affords a small amount of error checking, to help detect data corruption that might occur during transmission. You can choose even parity, odd parity, mark parity, space parity or none at all. When even or odd parity is being used, the number of marks (logical 1 bits) in each data byte are counted, and a single bit is transmitted following the data bits to indicate whether the number of 1 bits just sent is even or odd.

For example, when even parity is chosen, the parity bit is transmitted with a value of 0 if the number of preceding marks is an even number. For the binary value of 0110 0011 the parity bit would be 0. If even parity were in effect and the binary number 1101 0110 were sent, then the parity bit would be 1. Odd parity is just the opposite, and the parity bit is 0 when the number of mark bits in the preceding word is an odd number. Parity error checking is very rudimentary. While it will tell you if there is a single bit error in the character, it doesn't show which bit was received in error. Also, if even numbers of bits were in error then the parity bit would not reflect any error at all.

Mark parity means that the parity bit is always set to the mark signal condition and likewise space parity always sends the parity bit in the space signal condition. Since these two parity options serve no useful purpose whatsoever, they are almost never used.

The start bit indicates the beginning of a new data word. It is used to synchronize transmitter and receiver and is always a logical 0 (so the line goes HIGH).

Data is transmitted LSB to MSB, which means that the least significant bit (LSB, Bit 0) is transmitted first with 4 to 7 bits of data following, resulting in 5 to 8 bits of data. A logical 0 is transmitted by the HIGH state of the line, a logical 1 by LOW.

A parity bit can be added to the data bits to allow error detection. There are two (well, actually five) kinds of parity: odd and even (plus none, mark and space). Odd parity means that the number of LOW steps in the data word (including parity bit) is always odd, so the parity bit is set accordingly (I don't have to explain even parity, must I?). It is also possible to set the parity bit to a fixed state or to omit it.

The stop bit does not indicate the end of the word (as it could be derived from its name); it rather separates two consecutive words by putting the line into the LOW state for a minimum time (that means the stop bit is a logical 1).

Least Significant Bit (or Byte)
The lowest order bit. For example, the least significant bit of 01000111 is a 1 (e.g., that's the 1 on the very right). The most significant bit is a 0 (yep, that's the 0 on the very left).

Most Significant
The upper bytes or digits, For example, the MS digit of the number 832 are 8.

You can determine the transfer rate in bytes per second depending on the serial port speed and the coding system.
Here is the example:
8n1: 1 start bit + 8 data bits + 1 stop bit per byte = 10 bits per byte.

At 2400 bps, this is 240 bytes/characters per second. 2400 bps are normally transmitted using QAM where 4 bits are clustered, and hence encoded to 600 baud.

7e1: 1 start bit, 7 data bits, 1 parity bit, 1 stop bit = 10 bits per byte.

At 1200 bps, this is 120 bytes/characters per second. 1200 bps are encoded using DPSK ('Differential Phase Shift Keying', two bits are clustered), and this results again in 600 baud."