When the artist release their music to the internet they upload wave or aiff uncompressed audio file. However, the uncompressed audio file size is large. For example, a 3 minutes song will take from 30 MB up to 60 MB depends on the sample rate. This file size is too big to be streaming to the users. The ideal file size for streaming need to be 10 times smaller to play back normally.
The technology to achieve this task is call compression. The service provider compress that original uploaded audio to 3 MB from original 30 MB for a 3 minutes song. The way to achieve this is to remove the close musical data, super high frequency and super low frequency data. In another word is reduce the audio resolution. Use a TV example for easy understanding is to reduce the resolution from 4K to 480p. It looks like this :
Another better way to compress and reduce audio data size is the lossless compression call Free Lossless Audio Codec or FLAC. It uses the mathematical formula to reduce data size. It's similar to how you zip your office files before you email it. Here you can see the difference:
Which streaming service offers the best Audio Quality?
Now you know the science of the streaming audio. All music streaming services are offering High quality lossless compression audio nowadays from different price range. There is a very small quality difference from the service providers, like Spofity, Apple Music, Tidal, YouTube Music premium, etc.
Why are we hearing it differently?
Our ability to hear the difference in audio quality also rely on one key fact. That is the playing back devices. If your system has limited audio reproduction frequency range and resolution. For example cheap earphone/headphones made from low quality speakers and preamp. You will not able to hear the difference between high quality uncompressed audio and compressed audio .This is like you are trying to play a color video on a black white TV. You will never get other colors. Best way is to find a friend who has the device can hear the difference and go to his place to listen. Decide yourself after if you want to upgrade