But it is not correct (or at least not complete) just to say "it increases SNR beyond 96 dB". It only does it on a fraction of the spectrum (the fraction interesting to human hearing).
Our perception of audio is in the frequency domain, not the time domain. This means that even though, say, a 1kHz tone at -100dB is *below* the broadband noise floor of 96dB, it is *above* the noise floor in a narrow band around its frequency.
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That means we can perceive it as above the noise floor. Since music isn't a flat broadband noise source but strongly tonal, this means that the effective dynamic range of 16-bit PCM is *higher* than 96dB, because we can encode the information content above the noise floor.
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This is all *without* shaped dither. Shaped dither *further* increases dynamic range by taking advantage of the frequency-dependent response of the human ear, to lower the noise floor in the bands where it most matters.
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