Technically known as MPEG-1 Audio Layer 3, the MP3 format is a "lossy" format. That means that an MP3 file does not contain 100% of the original audio information. Instead, MP3 files use "perceptual coding." In English, that means that the stuff your ear doesn't notice gets thrown away to make the file smaller.
Why are "lossy" formats useful? Because "raw" audio files are much too large to travel quickly over the Internet. Audio CDs - which store the original, complete audio without loss - require 176,000 bytes per second. That "maxes out" a typical high-speed Internet connection. Just forget about a low-cost DSL or old-fashioned dialup modem!
But MP3 can compress by a factor of ten to one without much noticeable loss. And 17,600 bytes per second is much more reasonable. DSL and cable modem users can listen to it "on the fly" as streaming audio, and even dialup users don't have to wait an unbearably long time to download the song and then begin listening.
MP3 files can be compressed (shrunk) even more, but quality begins to suffer as the compression rate is increased.
Legal IssuesThe algorithm (mathematical technique) used to encode and decode MP3 files has been patented. That means that MP3 files can't be created or played back without paying license fees to the appropriate companies - at least, not in countries where software patents are legal. However, the primary patent holders (Thomson Consumer Electronics and Fraunhofer IIS) have largely chosen to leave individual users alone and pursue patent claims against software companies. As a result, there is a general belief that MP3 files are "free," which has led to popularity for the format - even though truly free alternatives like Ogg Vorbis offer better quality without legal worries.
Patents relating to MP3 are expected to expire in 2011, 20 years after the publication of the MP3 standard.
For More InformationFor a more technical discussion, see A Digital Audio Primer on the TeamCom books website. See also the Wikipedia entry on MP3. For patent licensing information, see mp3licensing.com (however, please note that other companies not represented by that site have made MP3-related patent claims).
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