We investigated the effect of quantization on the signal contrast, noise, and signal-to-noise ratio at three stages of the digital imaging chain, namely, acquisition, processing and display. Histogram analysis was performed for simple objects of constant magnitude superimposed on a uniform noisy background. After quantization, physical quantities, such as the signal contrast, noise and SNR, will vary depending on the fractional displacement of the quantization bin relative to the analog values. These physical quantities on average can provide information on the effectivenesss of a given A/D converter. As the rms value of the analog noise decreases, the various physical quantities become more sensitive to the effect of quantization. On average, the rms noise value after quantization will gradually increase as the quantization increment increases. The average SNR after quantization decreases initially as the quantization increment increases and then it misleadingly increases relative to the SNR prior to quantization. As quantization or further bit reduction becomes coarser, the noise Wiener spectrum will on average increase, and this increase will become relatively larger when the original noise data are obtained with higher x-ray exposures or larger sampling apertures. Image processing techniques allow for the potential increase in the number of bits in the image. However, the conventional CRT monitor is capable of only displaying 256 grey levels. At the display stage, though, observers may be able to detect signals having a contrast of less than a single display grey level due to the capability of the noise to carry the signal. However, in some cases, the potential of various processing techniques may be limited by the display device.