Simply put...it's a file compression format. Like Winzip.
It works on the basis that a large percentage of information (or sound) contained in a piece of music is not actually heard by your ears. It take the bits it thinks you don't hear, and discards them....making the end file (or Mp3) much smaller than the original or raw audio track.
For example, a CD contains audio in a raw format, and is uncompressed. To rip a track (take a CD and copy the music digitally to your computer) it would take up about 10mb per minute of recorded audio.
With an MP3, or any of the other vast arrays of formats, this would shrink - but by how much will depend on the format and also what's called the bit rate. The bigger the bit rate, generally, the better the quality. The most common MP3 bit rate is 128k. This would give you round about 10:1 (or 10 to 1) compression - meaning that it takes up 1/10th of the file size of the original. So your 10mb per minute is now roughly 1mb per minute.
This is not entirely accurate, but it's a good rule of thumb to work by.
There are dozens of different formats....a few of the most popular ones:
MP3Pro - supposed to offer similar quality to MP3 but in even smaller file sizes.
AAC/MPEG4 - Advanced Audio Coding. Developed by Dolby and the MPEG group. The two things are not the same, but if you buy an iPod then it uses the MPEG4 audio encoding function of AAC. There are other but you don't need to know. AAC is liked by the music industry because it offers similar file sizes to MP3, similar (if not better) quality than MP3 but has the advantage (or disadvantage some would say) of employing digital rights management
WMA - Windows Media Audio. Developed by your friends at Microsoft and available in many flavours - including the new WMA-Lossless format. This also has digital rights management functions, the record companies like this one too, in fact if you find a legal download site in the UK, then they will probably be using WMA files. The WMA-Lossless works on the basis that you want to hear the full (CD like) sound, but still have the track take up less space than the WAV filed.
OGG - an open source compression technique, which offers a better overall sound. Games manufacturers use OGG a lot, becuase they don't have to pay a royalty to the developers, and is good quality.
WAV - this is what you start with. When you rip a CD it's generally ripped to a WAV (or WAVE) file first, although some rippers (becuase of the speed of newer PCs) encode on the fly straight to MP3 bypassing this temporary section.
There's lots of places to look, some more techhy than others. If you want an MP3 for Dummies style site then look here:
http://www.pcstats.com/articleview.cfm?articleID=999
