Sound data is grouped into frames of 256 samples. Each frame is converted into the frequency domain and the most significant (highest-amplitude) frequencies are identified. A number of frequency bands are selected for encoding; the rest are discarded. The bitstream for each frame then encodes which frequency bands are in use and what their amplitudes are. This codec does not take into consideration actual sample rate, and has fixed ratio between input samples amount and output packet size (2 bits per input sample).
An open source decoder called nelly2pcm has recently been released.
Use in Flash technology
Nellymoser Asao codec is a format owned by a Nellymoser and it licensed for use in Flash technology to Macromedia/Adobe. The Nellymoser Asao codec is an integral part of the Flash-plugin since Flash version 6. The codec optimized for real-time and low-latency encoding of audio. Adobe Flash Player clients, when recording audio from a user's microphone, use the Nellymoser Asao codec and do not allow Flash programmers to select any other codec. The sampling rate of the audio capture can be controlled by the Flash programmer to increase and decrease encoding bitrate and quality. Encoding is done on the client host, and compressed data is the sent using Adobe's RTMP protocol to an RTMP server (Flash Media Server, Red5, Wowza).