Lossy audio compression is used in an extremely wide range of applications. In addition to the direct applications (portable audio players or computers), digitally compressed audio streams are used in streaming media on the internet; satellite and cable radio; and increasingly in terrestrial radio broadcasts. Lossy compression typically achieves far greater compression than lossless compression (data of 5 percent to 20 percent of the original stream, rather than 50 percent to 60 percent), by discarding less-critical data.
The innovation of lossy audio compression was to use psychoacoustics to recognize that not all data in an audio stream can be perceived by the human auditory system. Most lossy compression reduces perceptual redundancy by first identifying sounds which are considered perceptually irrelevant, that is, sounds that are very hard to hear. Typical examples include high frequencies, or sounds that occur at the same time as louder sounds. Those sounds are coded with decreased accuracy or not coded at all.
Because data is removed during lossy compression and cannot be recovered by decompression, some people may not prefer lossy compression for archival storage. Hence, as noted, even those who use lossy compression (for portable audio applications, for example) may wish to keep a losslessly compressed archive for other applications. In addition, the technology of compression continues to advance, and achieving a state-of-the-art lossy compression would require one to begin again with the lossless, original audio data and compress with the new lossy codec. The nature of lossy compression results in increasing degradation of quality if data are decompressed, then recompressed using lossy compression.
Easy CD-DA Extractor supports following lossy formats: AAC, aacPlus, MP3, Musepack, and Ogg Vorbis.
Source: Wikipedia