A growing body of research is focused on identifying and understanding the neurophysiological mechanisms that underlie tinnitus. Unfortunately, however, most current models cannot adequately explain the majority of tinnitus features. For instance, although tinnitus generally appears within minutes after entering a silent environment, most models postulate that tinnitus emerges over a much larger timescale (days). Similarly, there is a limited understanding of how the severity of tinnitus can differ in patients with a similar degree of hearing loss. To address this critical knowledge gap, we have formulated a novel explanatory model of tinnitus, the perception-update (PU) model, which rests on a theory of information processing and can explain several key characteristics of tinnitus onset. The PU model posits that the brain continuously updates the information received from the inner ear by comparing it to the received information immediately before. That is, the auditory system processes the relative change in sensory input, as opposed to the absolute value of the auditory input. This is analogous to the functioning of data compression technology used for music and images called differential pulse code modulation (differential PCM). The PU model proposes that the inner ear transmits sound change to the auditory cortex via an auditory N1 response, an event-related potential component that constitutes is a prime signaler of auditory input change. In cases of hearing impairment, the PU model posits that the auditory system finds itself in a state of uncertainty where perception has to be predicted based on previous stimulation parameters, which can lead to the emergence of tinnitus.