Instead of Dynamic Range Compression, the cellphone codecs use A-law or mu-law logarithmic range compression (non-binary weighting of the 8 bits). This effectively packs the bottom bits close together and spreads the top bits far apart, allowing a useful number of bits for both quiet sounds and for loud sounds, even though there are only 8-bits in total. This takes advantage of human logarithmic sensory perception, and works a lot like gamma correction as used in digitial photography (except for sound in this case).
Of course, it may be even better to use both dynamic range compression AND logarithmic coding.
