MP3 is an audio-specific compression format. The compression removes certain sounds that cannot be heard by the listener, i.e. outside the normal human hearing range. It provides a representation of pulse-code modulation–encoded audio in much less space than straightforward methods, by using psychoacoustic models to discard components less audible to human hearing, and recording the remaining information in an efficient manner. Similar principles are used by JPEG, a lossy image compression format. MP3 players come in many sizes and capacities. The smallest MP3 players use a type of memory known as flash; unlike conventional memory such as that found in a desktop computer, flash does not lose stored information when the power is turned off. Flash is very compact and uses very little power, allowing for extremely small designs with long battery life.

The limitation of flash-based ^MP3 players is that they do not have a great deal of storage capacity. For larger storage needs, hard disk-based MP3 players were developed. These can have storage capacities in the tens of thousands of songs, but sacrifice the ultra compactness of flash-based players. Hard disk-based MP3 players are also generally more expensive than flash-based players.