PDH is now being replaced by SDH equipment in most telecommunications networks.
PDH allows transmission of data streams that are nominally running at the same rate, but allowing some variation on the speed around a nominal rate. By analogy, your watch and mine are nominally running at the same rate, clocking up 60 seconds every minute. However, there is no link between our watches to guarantee the run at exactly the same rate, and it is highly likely that one is running a bit faster than the other.
The European and American versions of the PDH system differ slightly in the detail of their working, but the principles are the same. The European system is described.
The basic data transfer rate is a data stream of 2.048 Megabits/second (usually abreviated to "2 megs"). For speech transmission, this is broken down into 30 x 64 kilobit/second (abbreviated to "64K") channels plus 2 x 64K channels used for signalling and synchronisation. Alternatively, the whole 2 megs may be used for non speech purposes, for example, data transmission.
The exact data rate of the 2 meg data stream is controlled by a clock in the equipment generating the data. The exact rate is allowed to vary some percentage (+/- 50ppm) either side of an exact 2.048 Megabits/second. This means that different 2 meg data streams can (probably are) be running at slightly different rates to one another.
In order to move multiple 2 meg data streams from one place to another, they are combined together, or "multiplexed" in groups of four. This is done by taking 1 bit from stream #1, followed by 1 bit from stream #2, then #3, then #4. The transmitting multiplexer also adds additional bits in order to allow the far end receiving multiplexer to decode which bits belong to which 2 meg data stream and so correctly reconstitute the original data streams.
Because each of the four 2 Meg data streams is not necessarily running at the same rate, some compensation has to be made. The transmitting multiplexer combines the four data streams assuming that they are running at their maximum allowed rate. This means that occasionally, (unless the 2 meg really is running at the maximum rate) the multiplexer will look for the next bit but it will not have arrived. In this case, the multiplexer signals to the receiving multiplexer that a bit is "missing". This allows the receiving multiplexer to correctly reconstruct the original data for each of the four 2 meg data streams, and at the correct, different, rates.
The resulting data stream from the above process runs at 8.448 Mega bits / second (8 Meg). Similar techniques are used to combine four x 8 Meg together, giving 34 Megs. Four x 34 Megs, gives 140. Four x 140 gives 565.
565 Megabits/second is the rate typically used to transmit data over a fibre optic system for long distance transport. Recently, telecommunications companies have been replacing their PDH equipment with SDH equipment capable of much higher transmission rates.