There are so many misconceptions regarding the use of balanced signals, especially in (high quality) audio reproduction and, in some cases, in studio use. People associate XLR connectors (the most common standard for the balanced signal transfer) with a professional, therefore better, application.
The common way of thinking is: "Basically, if I use XLR instead of RCA, that's better, right?" Well, mostly NO.
The principle of balanced signal functionality has already been explained in another article of ours, Balanced and Unbalanced Signals, that you can read here. (Please, do!)
The Principle – Hardware-wise
The unbalanced signal transfer is very straightforward with two wires per channel: signal ("hot") and ground.
Above: Connecting source with amplifier via unbalanced mode (RCA).
When using the balanced one, the same pair ("hot" and ground) is used with the addition of "cold" wire, which is identical to "hot", just inverted.
Above: Connecting source with amplifier via balanced mode (XLR).
In practice, the majority of audio equipment (especially in the field of reproduction) works natively in the unbalanced mode. That means that we need to convert the unbalanced to the balanced mode inside the signal source and later do just the opposite in the next stage – convert the unbalanced to the balanced again. This forces us to have two additional stages (two additional converters) in the signal pathway. In an ideal world, that wouldn't be an issue (actually, in an ideal world we wouldn't even need a balanced signal transfer), but in practice it is – every additional component adds an additional „flavor“, which consists of various distortions, noises, signal reshaping, etc.
When to Use Balanced Signal Transfer?
In the majority of cases, audio equipment works in the unbalanced mode, therefore unbalanced RCA connectors are just fine, especially if the length doesn't exceed 2–3 m.
So, when is it better to use XLR?
A. Long distances
If you have amplifiers (monoblocks or active speakers) far from the source (over 3 m), it is safer to go on XLR.
B. Weak signal
In professional use (recording studios, on stage, ...), XLR can easily transfer weak signals (for example microphone) for several tens of meters due to the capability of annihilation of electro-magnetic interference that was picked on the way. The second advantage is the double signal („hot“ plus inverted „cold“), which can add +6 dB to the signal strength.
C. Natively balanced equipment
If both – your source and your amplifier – work natively in the balanced mode (meaning that you don't need to convert internally from balanced to unbalanced and vice-versa), then not only it is reccomended to use XLR, but it's a must. Note that this kind of equipment is not very common.
Above: Connecting natively balanced source and amplifier.
The use of XLR otherwise than for the examples above is senseless.
Above: Standard connectors for balanced signal transfer: XLR male, XLR female and stereo 1/4" jack.
There are two connector standards for the transfer of the balanced signal. The most common is XLR, sometimes called Cannon, the other one is standard 1/4“ stereo jack. There are also combinations of both available – at one side XLR, at the other side 1/4“ jack.
Above: Pin configuration: 1 - GND, 2 - "hot", 3 - "cold".
Is Every XLR Output/Input Balanced?
No. It should be, though. Some XLR connectors that you see on the equipment aren't really balanced, but they use just „hot“ and ground. Some sources may send only the „hot“ signal and some amplifiers receive only „hot“, while the „cold“ is grounded by a resistor that matches the amplifier's input resistance.
Can I Use Balanced Source and Unbalanced Amplifier or Vice-versa?
Yes, you can, but keep in mind that you will not be able to use the advantages of the balanced transfer this way. That might be the case if you have an extra XLR output on the source, while the amplifier has only RCA input. Or just the opposite.
Above: XLR to RCA cable and converter.
You can convert XLR to RCA via cable or standalone converter to which attach a cable. They come in various combinations: male-to-male, female-to-female and male-to-female.