The key point is masking: if a sound at a given frequency is loud enough, you are less likely to perceive weaker sounds at other frequencies. So there is little point in wasting bits on those frequencies during the time intervals where they are being swamped.

The exact frequency/amplitude relationships where masking effects come into play were studied by the telecoms early on (meaning in the 1950s-1960s era), and are still a key part of most lossy encoding models these days.

See https://en.wikipedia.org/wiki/Critical_band and https://en.wikipedia.org/wiki/Psychoacoustics as an introduction to the principles.