MP3 audio files are a lossy compressed music file common among all portable music players including Apple’s iPod and iPad. In most cases they offer 1/10th the file size of uncompressed CD audio.
Sound quality, though is often quite poor. All MP3 encoders offer variable bitrates, and the higher the better. Even at the highest bitrates, on decent audio systems the difference between MP3s and CDs will be audible.
Similar codecs are AAC (Apple) and WMA (Microsoft).
Most A/V receivers and all media servers will decode MP3s. For more information, check out our AV Receiver Review section and Media Server and MP3 Player Review section.