In processor design, microcode serves as an intermediary layer situated between the central processing unit (CPU) hardware and the programmer-visible instruction set architecture of a computer. It consists of a set of hardware-level instructions that implement the higher-level machine code instructions or control internal finite-state machine sequencing in many digital processing components. While microcode is utilized in Intel and AMD general-purpose CPUs in contemporary desktops and laptops, it functions only as a fallback path for scenarios that the faster hardwired control unit is unable to manage.

Housed in special high-speed memory, microcode translates machine instructions, state machine data, or other input into sequences of detailed circuit-level operations. It separates the machine instructions from the underlying electronics, thereby enabling greater flexibility in designing and altering instructions. Moreover, it facilitates the construction of complex multi-step instructions, while simultaneously reducing the complexity of computer circuits. The act of writing microcode is often referred to as microprogramming, and the microcode in a specific processor implementation is sometimes termed a microprogram.

Through extensive microprogramming, microarchitectures of smaller scale and simplicity can emulate more robust architectures with wider word lengths, additional execution units, and so forth. This approach provides a relatively straightforward method of ensuring software compatibility between different products within a processor family.

At the hardware level, processors contain a number of separate areas of circuitry, or "units", that perform different tasks. Commonly found units include the arithmetic logic unit (ALU) which performs instructions such as addition or comparing two numbers, circuits for reading and writing data to external memory, and small areas of onboard memory to store these values while they are being processed. In most designs, additional high-performance memory, the register file, is used to store temporary values, not just those needed by the current instruction.

To properly perform an instruction, the various circuits have to be activated in order. For instance, it is not possible to add two numbers if they have not yet been loaded from memory. In RISC designs, the proper ordering of these instructions is largely up to the programmer, or at least to the compiler of the programming language they are using. So to add two numbers in memory and store the result in memory, for instance, the compiler may output instructions to load one of the values into one register, the second into another, perform the addition function in the ALU, putting the result into a register, and then store that register into memory.

As the sequence of instructions needed to complete this higher-level concept, "add these two numbers in memory", may require multiple instructions, this can represent a performance bottleneck if those instructions are stored in main memory. Reading those instructions one by one takes time that could be used to read and write the actual data. For this reason, it is common for non-RISC designs to have many different instructions that differ largely on where they store data. For instance, the MOS 6502 has eight variations of the addition instruction, ADC, which differ only in where they look to find the two operands.

Using the variation of the instruction, or "opcode", that most closely matches the ultimate operation can reduce the number of instructions to one, saving memory used by the program code and improving performance by leaving the data bus open for other operations. Internally, however, these instructions are not separate operations, but sequences of the operations the units actually perform. Converting a single instruction read from memory into the sequence of internal actions is the duty of the control unit, another unit within the processor.

The basic idea behind microcode is to replace the custom hardware logic implementing the instruction sequencing with a series of simple instructions run in a "microcode engine" in the processor. Whereas a custom logic system might have a series of diodes and gates that output a series of voltages on various control lines, the microcode engine is connected to these lines instead, and these are turned on and off as the engine reads the microcode instructions in sequence. The microcode instructions are often bit encoded to those lines, for instance, if bit 8 is true, that might mean that the ALU should be paused awaiting data. In this respect microcode is somewhat similar to the paper rolls in a player piano, where the holes represent which key should be pressed.