THD measures how much an audio device adds unwanted harmonic content to a pure signal. Lower THD means cleaner sound. Audiophile gear typically targets <0.1%.
THD is expressed as a percentage. Reference points: <0.01%: extremely transparent (amplifier-grade). <0.1%: high-fidelity, audibly clean. <1%: acceptable for consumer headphones at moderate volume. >3%: audible distortion, "muddy" sound.
THD rises sharply at high SPL (loud volumes) — that's why even good headphones distort when pushed past their drivers' linear range. For consumer use, THD specs matter most when comparing two options at similar price; ranking by 0.1% vs 0.05% is rarely audible.