The invention comprises a method and apparatus for processing signals reflecting a physiological characteristic by detecting the intensity of light following tissue absorption at two wavelengths and subtracting the best estimate of the desired signal from the difference between the signals. Corrected first and second intensity signals are determined by applying a residual derived from a combination of the first and second intensity signals as multiplied by a residual factor and subtracted from a difference between the first and second intensity signals to the first and second intensity signals. In one embodiment, the method and apparatus are used to determine arterial oxygen saturation.