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Decoupling capacitor works as a charge reservior. It works to meet big current (charge) demand on power/ground line through absorbing/discharging its charge. This can keep power/ground line more "quiet".
Besides being a charge reservoir for high peak-currents, decoupling caps also provide a low impedance path to ground for errant AC signals on the DC supply lines. Typically on RF amplifiers you'll see a series inductor and shunt capacitor on the drain supply to an RF FET. The inductor keeps most of the RF energy from leaving the amp circuit, and the shunt (decoupling) cap provides a low impedance path to ground for anything that gets past the coil.
The impedance of a capacitor is given as Zc = 1 / (jωc). At DC (ω=0), the cap looks like an infinite impedance (open-circuit). As frequency (ω) goes up, Zc gets smaller (looks more like a short-circuit to AC signals).
The term "de-coupling capacitor" is synonymously used with "bypass capacitor" ..
Here is an extensive explanation on "bypass capacitor":
**broken link removed**
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