In October 1993, MP2 ("MPEG-1 Audio Layer 2") files appeared on the Internet and were often played back using the "Xing MPEG Audio Player," and later in a program for Unix by Tobias Bading called MAPlay which was initially released on February 22nd, 1994 (MAPlay was also ported to the Microsoft Windows OS).
Initially the only encoder available for MP2 production was the Xing Encoder, accompanied by the program CDDA2WAV, a "CD ripper" that transformed CD audio tracks to computer data files.
The Internet Underground Music Archive (IUMA) is generally recognized as the start of the on-line music revolution. IUMA was the Internet's first high-fidelity music web site, hosting thousands of authorized MP2 recordings before MP3 or the web were popularized. IUMA was started by Rob Lord (who later headed pioneering Nullsoft) and Jeff Patterson, both from the University of California, Santa Cruz, in 1993. Other founding members include Jon Luini, Brandee Selck, and Ahin Savara.
In the first half of 1995, MP3 files began flourishing on the Internet. MP3 popularity was mostly due to, and interchangeable with, the successes of companies and software packages like Nullsoft's Winamp, mpg123, and (now Roxio-owned) Napster. Those programs made it very easy for the average user to playback, create, share, and collect MP3s.
Controversies regarding peer-to-peer file sharing of MP3 files has flourished in recent years — largely because high compression enables sharing of files that would otherwise be too large and cumbersome to share. Due to the vastly increased spread of MP3s through the internet some major record labels reacted by filing a lawsuit against Napster to protect their Copyrights.
Since 2003, the number of MP3 blogs has exploded because many people believe that copyright laws are unfair.
Commercial online music distribution services (like iTunes Music Store) usually prefer other/proprietary music file formats that support DRM to control and restrict the use of digital music. This preference is most likely chosen in an attempt to prevent piracy of copyrighted materials, but most users with at least an intermediate understanding of computers will know that it's just a matter of time before someone else (usually in an open source software community) makes it easy to convert such proprietary file formats.
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