If you have read How CDs Work, you understand how musical sounds can be turned into numbers and recorded on a CD. A CD stores music using 44,100 samples per second, 16 bits per sample and two channels (for stereo sound). This means that a CD stores about 10 million bytes (megabytes) of data per minute of music on the CD. A three-minute song therefore requires 30 megabytes of data.
If you have ever tried to download files on the Internet, you know that 30 megabytes is huge. If you are using a modem to connect to the Internet, 30 megabytes of data would take several hours to download.
MPEG (The Moving Picture Experts Group) has developed compression systems used for video data. For example, DVD movies, HDTV broadcasts and DSS satellite systems use MPEG compression to fit video and movie data into smaller spaces. The MPEG compression system includes a subsystem to compress sound, called MPEG Audio Layer-3. We know it by its abbreviation, MP3.
MP3 can compress a song by a factor of 10 or 12 and still retain something close to CD quality. So a 30-megabyte sound file from a CD reduces to 3 megabytes or so in MP3. When you download the MP3 file and play it, it sounds almost as good as the original file. If you wanted to, you could download an MP3 file, expand it back to its original size and then record it on a writable CD so you can play it in a CD player. All that you are doing is converting back and forth between different formats to make downloading easier.
Here are some interesting links: