Essentially, a microphone is a mechanical device that converts a sound impulse into an electrical signal. However, there's not an awful lot of energy in a sound wave, and we need signals to be a bit more significant in order to do things like record, mix or process them.
Enter the microphone pre-amp! Sometimes shortened to Mic Pre, these devices are responsible for precisely amplifying those tiny microphone signals up to a suitable level. The more precisely they can do this, the cleaner and more accurate the output will be, and often this will be the difference between a cheap pre-amp and a more professional model.
Amplifying Microphone Signals
Conversely, some pre-amps - such as those with vintage or valve designs - colour the sound, but in a good way; these will also cost more because of the desirable attributes they contribute to the sound. Built-in EQ and Compression will also boost the price, in return for greater sonic flexibility.
Essential for Serious Home Studios
Even if you have a modest home recording studio, a good microphone pre-amp is a worthy investment - especially if you record vocals - as it can make the difference between a thin, weak signal and a rich, warm and punchy recording that captures the emotion and nuances of the performance.
If you choose a pre-amp that doesn't have an instrument input, but you still want to record high-impedance sources like a guitar or bass, then you'll also want to pick up a DI box. They work in a similar way to a pre-amp - however, DI boxes are much more simple devices, and consequently tend to be considerably cheaper.