MP3 is actually a definition - how to encode sound suchas speech or music into acompressed digital, computer-readable format. It was an EU-funded project, intended for films, that is tearing the music industry apart.
A standard music CD is created by sampling the music 44,000 times a second against a measurement with 65,536 levels of sensitivity - that is, 16 computer bits. This produces a stream of digital 1s and 0s. From this the original sound can be recreated "on the fly" as the CD is played.
But it also creates a lot of data - 1.4 million bits per second of stereo music. And it does not take into account the way our ears work: we are more sensitive to some frequencies than others and you can lose some of the highfrequency data without noticing any difference.
Engineers looking to encode films on to high-capacity CDs - what has now become the digital video disc (DVD) format - needed a method to contain CD-quality sound in smaller files. So in 1987 a team at Fraunhofer-Gesellschaft in Germany began the project with the University of Erlangen to reduce the sound files.
They developed and patented the algorithm for turning sound into an MP3 file, using listening tests to compare their theoretical coding system with what humans hear. CD-quality sound requires less than a tenth as much disc space, so a 50-minute CD can be turned into a 50-megabyte file, rather than the 500 megabytes it needs on the original disc.
The digital nature of the MP3 format also means it has no copy protection, which has terrified the music industry. Anyone can swap MP3 files over the internet: it is like making a tape of a record, except the quality is always perfect.
The name comes from the abbreviation of "Moving Picture Experts Group", an international group that helped to create standards for digitising music and speech.
More details can be found at http://iis.fhg.de/amm/techinf/layer3/index.html