Traditional DC Power Pack & Block control systems:
Power Pack combines a continuous DC voltage from 1-16 volts
and a polarity switch to reverse voltage polarity and change engine direction.
Selector switches in a control panel connect Power Pack to Blocks
of track.
Inside the Loco diodes or other electronics elect directional lighting.
DCC Works
Different
Hand-held throttle linked by wire, infrared or radio control selects the loco
and its speed, direction, special functions, MU consisting, etc.
A command station receives throttle digital data along a
data bus (throttle bus), called by various different names:
XpressNET by Lenz or LocoNet by Digitrax or CabBus by NCE. These networks
are proprietary to a specific manufacturer and are not interchangeable.
This data is converted in the command station into “packets”
of information destined for specific “addresses” (decoders).
For example it may create a command telling loco #1234 to go forward at
10% of maximum speed.
The BOOSTER takes the power from the power supply and the packets
of data from the command station and converts the data into high power
(i.e.: 5 amps at 15 VAC) data packets which are fed to ALL of the rails. >>>>
Power Control Theory for Model Railroads

Digital Command Control

Finally -- Each loco is equipped with a "decoder" that only recognized
its designated "address" and converts the packets of information sent
to that address into commands that activate power transistors to turn-on
motors, lights, bells, whistles, etc.