What is it and what does it do?

CPU stands for Central Processing Unit. It is the part of the computer that interprets and carries out the instructions found in the software. In most CPU's the job is split between two parts, the control unit and the excecution unit (there is sometimes more than one excecution unit). The control unit directs program flow and the excecution unit performs operations on data. There is nearly always a collection of registers to hold operands and intermediate results (operand= the quantity on which an operation is performed). The term CPU is sometimes used to describe other important parts of a computer such as caches and input/output controllers.

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See How the CPU Works In One Lesson