The Fraunhofer IIS-A started in 1987 to work on perceptual audio coding. In a joint cooperation with the University of Erlangen (Prof. Dieter Seitzer), the Fraunhofer IIS-A finally devised the algorithm standardized as ISO-MPEG Audio Layer-3 (IS 11172-3 and IS 13818-3).

Digital Audio uncompressed = 44,1 kHz sample rate / 16-bit samples / 2 audio channels needs a bandwidth of 1.4 Mbps. 1.400 Mbit represent one second of stereo music in CD quality.

Using MPEG audio coding, it is possible to shrink down the original sound data by a factor of 12, without audibly losing sound quality.
A MPEG-1 Audio, Layer 3 (MP3), "near CD-quality" stereo audio stream needs only 128kbit/s.
Factors of 24 and even more still maintain a sound quality that is significantly better than what you get by just reducing the sampling rate and the resolution of your samples.


Performance Data of MPEG Layer-3:

Sound Quality	Bandwidth	Mode	Bitrate	Reduction ratio
similar to FM radio	11 kHz	stereo	56...64 kbps	26...24:1
near-CD	15 kHz	stereo	96 kbps	16:1
CD	>15 kHz	stereo	112..128kbps	14..12:1