Baud, or baud rate, is used to describe the maximum oscillation rate of an electronic signal. For example, if a signal changes (or could change) 1200 times in one second, it would be measured at 1200 baud. While the term was originally used to measure the rate of electronic pulses, it has also become a way to measure data transmission speeds of dial-up modems.
If a modem transfers a single bit per electronic pulse, one baud would be equal to one bit per second (bps). However, most modems transfer multiple bits per signal transition. For example, a 28.8 Kbps modem may send nine bits per second. Therefore, it would only require a baud rate of 2100 (28,800 / 9). 56K modems often use a baud rate of 8000. This means they send seven bits per signal transition, since 7 x 8000 = 56,000.
Modems typically select the most efficient baud rate automatically (sometimes called the "autobaud" setting). However, many dial-up modems allow you to override the default baud setting and manually enter the baud rate using a software interface. This can be useful if a dial-up ISP requires a specific baud rate for communication. However, reducing the baud rate of a modem may also reduce the maximum data transmission rate.
Baud rates above 8000 are not very reliable on analog telephone lines, which is why most modems do not offer higher baud settings. Additionally, at such a high baud rate, only seven bits can be sent consistently with each pulse, which is why dial-up modem speeds maxed out at 56 Kbps many years ago. Fortunately, newer technologies such as DSL and cable modems offer much faster data transfer rates. Since DSL and cable modems communicate over digital lines, baud rate is irrelevant to these devices.