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A decoder is an IC which splits an n-bit input value into 2n output lines. A decoder has many uses, but the one presented here is translating a 2-bit input value into 4 lines to allow the 4 different operations of the CPU. The decoder will also be used in the next chapter as part of the multiplexer.
The decoder works by doing AND operations on all combinations of the input and inverted input values, and then selecting the output using an OR operation on all of the inputs.
The decoder is a common circuit, so it has been encapsulated in a 74139 chip. The 74139 contains 2 decoders, and based on the binary input to each decoder, selects the correct output. The 74139 chip is different in the enable and all output values are enable low, or selected when the value is low. Therefore to get the behavior we want from the chip, the values must be sent to an inverted (7404) chip to be used.