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Premiere Pro CS3 is digital nonlinear editing software. A breakdown of this description can give you clues about how the program works:
Digital: Premiere Pro CS3 manipulates digital media: digital video and audio, scanned images, and digitally created artwork and animation stored in various formats. Regardless of the particular format, these materials are stored as files on your computer’s hard disk. Strictly speaking, Premiere Pro CS3 doesn’t convert analog video and audio to digital form, although it does contain controls that do so in conjunction with built-in hardware (such as the IEEE 1394 or USB 2 connection included in most computers) or add-on hardware (such as an analog video capture card).