This article is from the MPEG FAQ, by Frank Gadegast phade@cs.tu-berlin.de with numerous contributions by others.
MPEG is an ISO committee that proposes standards for
compression of Audio and Video. MPEG deals with 3 issues:
Video, Audio, and System (the combination of the two into one
stream). You can find more info on the MPEG committee in other
parts of this document.
I've heard about MPEG Video. So this is the same compression
applied to audio? (MPEG-Audio)
Definitely no. The eye and the ear... even if they are only a
few centimeters apart, works very differently... The ear has
a much higher dynamic range and resolution. It can pick out
more details but it is "slower" than the eye.
The MPEG committee chose to recommend 3 compression methods
and named them Audio Layer-1, Layer-2, and Layer-3.
What does it mean exactly? (MPEG-Audio)
MPEG-1, IS 11172-3, describes the compression of audio
signals using high performance perceptual coding schemes.
It specifies a family of three audio coding schemes,
simply called Layer-1,-2,-3, with increasing encoder
complexity and performance (sound quality per bitrate).
The three codecs are compatible in a hierarchical
way, i.e. a Layer-N decoder is able to decode bitstream data
encoded in Layer-N and all Layers below N (e.g., a Layer-3
decoder may accept Layer-1,-2 and -3, whereas a Layer-2
decoder may accept only Layer-1 and -2.)
 
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