The History of MP3
The Early Years
The development of the now-ubiquitous MP3 audio compression scheme can be traced back to 1987, at the Fraunhofer Institut Intergriete Shaltungen in Erlangen, Germany. A project was started to develop a high-quality, high-compression audio codec; this was dubbed EUREKA project EU147, Digital Audio Broadcasting. The end result of this product eventually became known as ISO-MPEG Audio Layer 3, A.K.A. MP3.
In January of 1988, the Motion Picture Experts Group (MPEG) was created as a committee within the International Standards Organization (ISO). In 1989, Fraunhofer got a patent for their compression scheme, which was submitted to the ISO in 1992 and included in the MPEG-1 specification, published in 1993. In 1990, Fraunhofer developed the first MP3 player, but by all accounts it was a fairly underwhelming bit of work. The first song compressed into MP3 format was "Tom's Diner" by Suzanne Vega, because of its dynamic range. On the 26th of January, 1995, Fraunhofer applied for a US patent on MP3, which it received on 26 November, 1996. All was quiet on the MP3 front until...
"And then there's running, and screaming..."
In 1997, Tomislav Uzelac, working at Advanced Multimedia Productions, wrote the AMP MP3 playback engine, the first 'real' MP3 player to be publicly available. Then a couple of students, Justin Frankel and Dmitry Boldyrev, put a pretty face on it, made it run in windows, and called it--yep, that's right--WinAMP. Basically, this little piece of free software, released in 1998, nine years after MP3 was originally patented, sparked the "MP3 Revolution." A proliferation of players, rippers, hardware devices, and search tools soon followed.
In 1999, a record label called Sub Pop began to distribute some of their tracks in MP3 format, apparently the first record label to do so. One other major development occurred in 1999--Napster, written by a 19 year old student named Shawn Fanning. Let it never be said that a teenage geek can't change the world overnight. WinAMP had already made MP3s easy to use; now Napster made them virtually effortless to find. The RIAA and the US legal system have since put a stop to Napster. However, it is still certainly possible to find MP3s, and they're not going anywhere soon.
Sources:
Adam Walker (the Tom's Diner tidbit)
Behind the Files: History of MP3, by Gabriel Nijmeh, http://www.compunotes.com/ArticleSection/behindthefilesmp3.htm
MP3 Overview, on hotwired.lycos.com
The History of MP3 and how did it all begin, http://www.mp3-mac.com/Pages/History_of_MP3.html