digital equalizers

Stopped up ears caused by allergies have led me to using the Itunes equalizer. I don't like the sound of the equalizer when my ears are clear, but when they are not, the equalizer and balance control make listening much more enjoyable.

I'm curious though about how (in very general terms) the digital equalizer works. Does it attenuate or boost? And what does it do to the bit stream? And I wonder if it has an effect on bit perfect output?

Also, since I do have some permanent high frequency hearing loss I've often wondered if a really good equalizer would enhance listening, even when my ears are not "plugged up".

Any feedback is much appreciated.

JPO