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MPEG-1 Audio Layer 3, more commonly referred to as MP3, is a patented digital audio encoding format using a form of lossy data compression. It is a common audio format for consumer audio storage, as well as a de facto standard of digital audio compression for the transfer and playback of music on digital audio players.

MP3 is an audio-specific format that was designed by the Moving Picture Experts Group as part of its MPEG-1 standard. The group was formed by several teams of engineers at Fraunhofer IIS in Erlangen, Germany, AT&T-Bell Labs (now a division of Alcatel-Lucent) in Murray Hill, NJ, USA, Thomson-Brandt, and CCETT as well as others. It was approved as an ISO/IEC standard in 1991.

The use in MP3 of a lossy compression algorithm is designed to greatly reduce the amount of data required to represent the audio recording and still sound like a faithful reproduction of the original uncompressed audio for most listeners. An MP3 file that is created using the setting of 128 kbit/s will result in a file that is about 1/11th the size of the CD file created from the original audio source. An MP3 file can also be constructed at higher or lower bit rates, with higher or lower resulting quality.

The compression works by reducing accuracy of certain parts of sound that are deemed beyond the auditory resolution ability of most people. This method is commonly referred to as perceptual coding. It internally provides a representation of sound within a short-term time/frequency analysis window, by using psychoacoustic models to discard or reduce precision of components less audible to human hearing, and recording the remaining information in an efficient manner.

This technique is often presented as relatively conceptually similar to the principles used by JPEG, an image compression format. The specific algorithms, however, are rather different: JPEG uses a built-in vision model that is very widely tuned (as is necessary for images), while MP3 uses a complex, precise masking model that is much more signal dependent.