This article is from the MPEG FAQ, by Frank Gadegast phade@cs.tu-berlin.de with numerous contributions by others.
Well, the MPEG standard has forged together two main coding schemes
that offered advantages either in complexity (MUSICAM) or in
performance (ASPEC).
Layer-2 is identical with the MUSICAM format. It has been designed as a
trade-off between sound quality per bitrate and encoder complexity. So it is
most useful for the "medium" range of bitrates (96..128 kbps per channel).
For higher bitrates, even a simplified version, the Layer-1, performs well
enough. Layer-1 has originally been developed for a target bitrate of 192
kbps per channel. It is used as "PASC" within the DCC recorder.
For lower bitrates (64 kbps per channel or even less), the Layer-2 format
suffers from its build-in limitations, and with decreasing bitrate, artefacts
become audible more and more. Here is the strong domain of the most
powerful MPEG audio format, Layer-3. It specifies a set of unique features
that all address one goal: to preserve as much sound quality as possible
even at very low bitrates.
 
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