MP3 is a compressed file format (like JPEG or Zip). Techniques of
compression vary. MP3 uses two compression techniques (essentially
mathematical formulas or schemes) to effectively remove redundant
or less important data to make the file smaller.
Redundant data may not be actually removed, it could simply be transformed
(this is called lossless compression, see Coding for
more information). For example, if a file has the following data:
5 5 5 5 5 5 5 5, this could
be represented as 8 5. As long as you know the first number tells you how
many of the second number - this is the compression scheme - you've saved
a lot of space.
However, the most important part of how MP3 works has to do with the
human perception of sound. The MP3 process uses our knowledge of human
hearing to cut out part of the original signal that we may not actually
perceive (or at least may not be as important as other parts of the sound).
Combined with a lot of number crunching and processing MP3 is able to
achieve excellent compression ratios.
The processes involves a number of steps, for the
complete process goto the Tutorials section,
here is a brief overview.