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MP3 uses lossy compression to remove frequencies that are "masked". Some of the algorithms used in it are patented by Thompson and [Fraunhofer IIS |http://www.iis.fraunhofer.de/index.html]. They say that only commercial users (ie software and hardware sellers) have to license it - players that are given away for free do not have to be licensed. However, this is also what [Unisys] said about the [LZW] patent...
A free, alternative format is OggVorbis.