This article is from the MPEG FAQ, by Frank Gadegast phade@cs.tu-berlin.de with numerous contributions by others.
MPEG 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) from 1 to 3.
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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