Ok....
The audio signal created in a microphone is very small. The line input of a soundcard requires a higher voltage signal. The preamp takes the tiny signal and makes it into a bigger usable one ('line level' is the level that soundcards and many inputs look for… so it would be said that a pre brings the mic's signal to line level.)
Boosting that small (very small) signal from the mic to line level is a process with lots of room to f**k up. Bad transistors can distort a wave form. Poorly designed circuitry can attenuate or boost certain frequencies, create distortion or add unnatural, artificial effects to the sound… Its very easy for over worked engineers on a deadline or cost cutting managers screw things up.
Ideally a preamp will deliver a signal that is identical to the original but larger.
Or it will boost the signal but color the sound to make it sound *better* than the original. Usually this is done by overdriving vacuum tubes to create warmth.... but watch out for cheap toobz, they just suck...
---------------------------------
The mic input of a sound card actually has a pre amp in it… but it is terrible and useless for serious recording. Most guys use either the line input of their card or a direct digital input (like spdif, but going digital in requires an a to d converter and a soundcard with spdif in).
Most mixers have pre’s as well, and they vary from terrible to very good. Outboard mic pres often sound much better than those in mixers, but not the cheapie ones…
IMO the difference between a bad pre and a good pre is huge… but the difference between a good pre and a great pre takes a good monitoring system and good ears to notice. You can get a good 2 channel pre for $200 (M-audio dmp-3.)
Things like keyboards and CD players and tape decks are already at line level and do not need pre’s. Guitars, microphones, record players all need pres.
