Familiarize about concepts of converting Digital Values to Analog Values.
One day, I wanted to measure the distance with the help of Infrared sensor connected to Arduino. Infrared Sensor sends the Analog input to the Arduino But without the help of ADC (Analog-to-digital converter) chip, It is impossible to read analog values. So arduino uses ADC chip of 10 bit resolution to convert analog values into digital ones.
Well I said that Arduino uses the 10 Bit Resolution chip. But what does that 10 Bit mean?
It means that it can divide an analog signal to 2^10 digital values means 1024 values.
AS you can in above picture, 1 V is divided into 8 steps that means it represents the 8 bit ADC chip. Similarly a 10 bit ADC chip would divide the 1 V into the 10 steps.
For example, If we are Sending the 5 V input to the arduino, 10 it ADC chip will convert its value to 1023, Similarly 2.5 V will be mapped to 512.
After Reading this post you might have got overview about working of ADC chip.