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Germanium diodes are used in a variety of circuits, and can be used to create a clipped (square) sound wave. When viewing the clipped wave on an oscilloscope, the "corners" of the square wave are not as crisp or sharp as those produced by silicon diode clipping, thus giving a distinct "Germanium Tone."
Which is better? Neither. It's just a matter of preference. Some circuits have modifications to allow the player to change the clipping option from silicon, LED, or Germanium.
