Why MP3 is Popular

The main reason is that it is cost effective.

This cost effectiveness breaks down into two reasons. First, the compression works well, delivering an excellent quality to quantity ratio. In other words, a song that is one fifth the size it would be on a CD is NOT one fifth the quality. Second, it is an open standard. That means anyone can get the specification (it costs 140 USD) and no single company owns the standard. Also, one can easily get public domain source code. Furthermore, this has driven to a proliferation of MP3 decoders, widely available for free.

Additionally, there is an element of timing--MP3 became available and used at the right time, during an explosion of file sharing on the internet and the ability to cheaply market MP3 hardware players. And while the quality is not as high-fidelity as CDs, most people will accept it.