The ability to detect a brief increment in intensity in a longer duration stimulus is often used as a measure of the intensity resolution of the auditory system, but it is unclear how listeners actually perform the task. Early investigators suggested that the decision as to the presence or absence of an increment was based on the overall energy within the critical band centered on the signal frequency. The use of signal energy falling outside of the critical band is often limited by introducing a noise masker. However, facets of the noise may impact increment detection beyond this intended purpose. Recent findings indicate that performance in increment detection can be impaired by envelope fluctuations in a masker. This interaction suggests an alternate decision process to energy detection based on detection or discrimination of envelope modulation. An energy-based decision device can be evaluated by comparing performance in a task where a listener is asked to detect a change in intensity to performance in a task where the listener is asked to identify the direction of the change. An energy-based decision process would predict better performance in identification than in detection. A modulation-based decision device can be evaluated by adding irregularity to the envelope through addition of a noise masker of varying bandwidth. The purpose of the current study was to evaluate the decision process underlying increment detection by comparing performance for detection and identification, and by evaluating the effect of noise on detection. Results indicate that listeners are better able to detect a change in intensity than to identify the direction of that change, where performance is virtually at chance. Thresholds for increment detection increase with increasing bandwidth for an on-frequency noise masker. While an off-frequency noise masker can produce masking at certain signal frequencies, there is no effect of bandwidth. A decision device based on energy detection cannot account for these results. A model that includes a modulation filter bank analysis of envelope modulation can account for observed data, but a model based on discrimination of spectral patterns does equally well