The combination of small size and acceptable fidelity led to a boom in the distribution of music over the Internet in the mid- to late-1990s, with MP3 serving as an enabling technology at a time when bandwidth and storage were still at a premium.

This allows a large reduction in file sizes when compared to uncompressed audio. With regard to audio compression (the aspect of the standard most apparent to end-users, and for which it is best known), MP3 uses lossy data-compression to encode data using inexact approximations and the partial discarding of data. MP3 (or mp3) as a file format commonly designates files containing an elementary stream of MPEG-1 Audio or MPEG-2 Audio encoded data, without other complexities of the MP3 standard. A third version, known as MPEG 2.5 - extended to better support lower bit rates - is commonly implemented, but is not a recognized standard. Originally defined as the third audio format of the MPEG-1 standard, it was retained and further extended - defining additional bit-rates and support for more audio channels - as the third audio format of the subsequent MPEG-2 standard. MP3 (formally MPEG-1 Audio Layer III or MPEG-2 Audio Layer III) is a coding format for digital audio developed largely by the Fraunhofer Society in Germany under the lead of Karlheinz Brandenburg, with support from other digital scientists in the United States and elsewhere.

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