Delta modulation is a signal encoding technique used to more efficiently transmit analog signals over bandwidth-limited channels. It works by approximating the input signal as a staircase function and transmitting only a single bit per sample to indicate whether the signal increased or decreased from the previous sample. At the receiver, the bits are used to reconstruct the staircase approximation, which is then filtered to recover the original analog signal. The key aspects are transmitting only a single bit per sample, using a fixed step size, and increasing or decreasing the approximated signal based on the signal differences.