Keep in mind that it was only five years ago that the music industry was facing a civil war over the next-generation disc-based music format—the successor to the wildly successful CD. At that time, hardly anybody doubted that the music would be encoded optically on a round plastic disc the size of a CD. The quibbling was over the technology of that encoding, and two leading contenders emerged—DVD-Audio and Super-Audio CD [see sidebar, "A New Generation of CDs"].

Even then, while the audiophiles were fiddling, a few technophiles were burning. Computer-savvy music buffs had started quietly applying some of the earliest compression formats, such as MP3 and WAV, to move their CD collections to their computer hard drives. At the same time, other people were expanding their collections by downloading music from the Web onto CDs.

It was a grass-roots revolt that the consumer electronics manufacturers couldn't ignore, and in 1998 they came out with the first portable digital music players. By then, Napster, the file-sharing system, was on its way to becoming a major, if controversial, force in the recorded music industry.

Today, with the move to the big time, challenges have come to compression formats that the pioneers didn't worry about. Playing compressed files on a high fidelity home system demands the ability to re-create a high quality signal. Copyright requirements, too—not a major consideration until recently—are now at the forefront as companies turn downloading into a legitimate business.

The challenge for technologists is to accommodate these new needs without interfering with the essential purpose of compression algorithms: making music files smaller. To understand this function, consider the compact disc. Music is converted into digits for a compact disc by a technique called pulse code modulation. Basically, the music's two channels are sampled 44 100 times a second, and each sample is converted into a pair of 16-bit numbers, one for each of the two stereo channels. Those numbers are then put onto the disc. Generally, CDs can store a maximum of 74 minutes of music, with one minute of music occupying nearly 10 megabytes, including raw data and overhead.

Even with a broadband connection, it would take about three and a half minutes to download each minute of music on a CD. A typical 50-minute CD would take 3 hours to download. Without compression, even the largest iPod, packing a 40-GB hard drive, could store only about 67 hours of music. It is compression that turns the little player into a library in your pocket, capable of carrying about 500 hours of music.

The trick is to take away bits without degrading the fidelity of the sound that the listener hears. To do this, the algorithms exploit quirks in human hearing and, more specifically, in the way the human brain processes sound.

Hearing varies from person to person, based on such things as age, sex, and previous exposure to loud noise. But even what is commonly called perfect hearing isn't so perfect. Most young people can hear frequencies between about 20 hertz and 20 kilohertz. But most adults, particularly older ones, cannot hear all that much above 16 kHz. And even within the wide swath of frequencies that most people can hear, some bands register more loudly than others.

Then there are the brain's perceptual quirks: it has trouble distinguishing tones that are closely spaced in frequency, and it reflexively masks any sounds that occur immediately after sudden, louder ones. (These two are known as frequency and temporal masking.) It also hears tones differently when they are sounded in isolation or accompanied by other tones. Therefore, masking algorithms that take into account tones and the harmonics surrounding them are somewhat more successful than those that ignore tone differences.