What is AC3?
AC3 (Dolby Audio Coding 3) is a 5.1 format, which means that it provides five full-bandwidth channels, front left, front right, center, surround left, and surround right. A low-frequency effect (LFE) channel is included for the sound needed for special effects. AC3 was the first coding system designed specifically for multichannel digital audio. AC3 is the sound format for digital television ( DTV ), digital versatile discs ( DVD), high definition television ( HDTV ), and digital cable and satellite transmissions. AC3 supports audio sampling rate up to 48khz.

What is MP3?
MP3 stands for MPEG Audio Layer 3, which revolutionized digital music. Derived from the audio sections of the MPEG-1 and MPEG-2 video specifications, MP3 compresses CD-quality sound by a factor of roughly 10, while retaining most of the original fidelity. MP3 files are played on the computer via media player software, such as Apple's iTunes and Microsoft's Windows Media Player, as well as in countless iPods and other handheld players. While 128 Kbps (kilobits per second) is considered the norm for MP3 files, MP3s can be encoded to bit rates from 8Kbps to 320 Kbps. The higher the bit rate, the better the sound and the larger the file.