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Advanced Audio Coding (AAC) is a standardized, lossy compression and encoding scheme for digital audio. Designed to be the successor of the MP3 format, AAC generally achieves better sound quality than MP3 at similar bit rates.

AAC has been standardized by ISO and IEC, as part of the MPEG-2 and MPEG-4 specifications. The MPEG-2 standard contains several audio coding methods, including the MP3 coding scheme. AAC is able to include 48 full-bandwidth (up to 96 kHz) audio channels in one stream plus 16 low frequency effects (LFE, limited to 120 Hz) channels, up to 16 “coupling” or dialog channels, and up to 16 data streams. The quality for stereo is satisfactory to modest requirements at 96 kbit/s in joint stereo mode; however, hi-fi transparency demands data rates of at least 128kbit/s (VBR). The MPEG-2 audio tests showed that AAC meets the requirements referred to as “transparent” for the ITU at 128 kbit/s for stereo, and 320kbit/s for 5.1 audio.

AAC’s best known use is as the default audio format of Apple’s iPhone, iPod, iTunes, and the only format used for iTunes Store audio.

AAC is also the standard audio format for Sony’s PlayStation 3 and is supported by Sony’s Playstation Portable, latest generation of Sony Walkman, phones from Sony Ericsson, Nseries Phones and the latest S40 models from Nokia, Android based phones, Nintendo’s Wii (with the Photo Channel 1.1 update installed for Wii consoles purchased before late 2007), the Nintendo DSi, and the MPEG-4 video standard. [Source: Wikipedia]