MP3 is a data compression format that makes a digital music file smaller the same way a bicycle tire gets smaller when you let the air out of it. The problem with an MP3 file is that it's a "lossy" format in that it literally throws away some data to make the file smaller using an algorithm based on the way we perceive audio. It keeps the loudest frequencies that we hear and gets rid of the rest.
"Lossless" data compression doesn't throw anything away perceptually, which is why everyone likes the way it sounds. It sounds the same as the original file, only the file is smaller. Cool, eh? The problem is that the file is only 40 to 50% smaller, while a lossy format can be as small as 10% of the original.
But the question here is why we even need another data compression scheme. We already have a number of them that work just fine already.
As an example, Techradar did a test between the popular lossless encoders using Feist's 1234 and this is what they found:
The original WAV file: 30.8MB
WMA Lossless : 18.7MB
Apple Lossless : 19.4MB
FLAC (Level 8) : 19MB
MP3HD (maximum): 20.7MB
So what's the point of a new format if it doesn't do a better compression job that it's competitors? In fact, it did worse! In the article, it states that MP3HD and an MP3 at 320Kbps sound virtually indistinguishable, so why bother? This seems like another example of technology for technology's sake (or a royalty stream) instead of filling any real market need.
Bandwidth is becoming so cheap and abundant that pretty soon any sort of data compression will be a thing of the past. Let's stop using low bandwidth MP3s in favor of 320Kbps unitl we can make the jump to pure wave or aiff files. They're not perfect but they're so much better than what we used to now.