Direct Sound

Windows audio interface introduced in Win98.

Improved the gaming experience compared with Wave Out

 

With Vista, a new audio architecture was introduced.


The default (Direct Sound) sends all audio to the mixer.
In the audio panel you specify sample rate and bit depth.
All audio not having this sample rate is resampled to match this setting.

If your audio collection is mixed, you won’t have automatic sample rate switching with DS.

 

By design, the mixer converts all input to 32-bit float and in the end of course back to the bit depth (16 or 24) the audio device is capable off.

The result is dithered even when playing a single stream.

This applies to Win7 as well.

 

If you want to bypass the mixer to get automatic sample rate switching and to get rid of the dithering, you need a media player supporting WASAPI or ASIO.
Both protocols talk straight to the audio device
It is up to the developer of the media player to match the properties of the audio with the properties of the sound card.
ASIO will only work if your audio device supports it (proprietary protocol)
WASAPI is integral part of Vista/Win7

References
  1. DirectSound - WikipediA
  2. Windows 7 audio architecture - The Well-Tempered Computer