What is MPEG?
MPEG-1: This first set of standards was developed for audio and video compression. MPEG-1 Layer 3 is a codec within these standards, known simply as MP3, or the popular audio compression format for music. The video format of MPEG-1 was used to store movies on CDs, known as Video CD, or VCD. Quality is equal to that of a VHS tape, and compatibility playback on CD/DVD players is high.
MPEG-2: This standard improved on MPEG-1 by including the ability to encode interlaced pictures. It is widely used for digital cable, satellite and over the air digital signals. This format is also prevalent for movies distributed on DVD. Television receivers, DVD players and television stations typically incorporate the MPEG-2 standard
MPEG-4: Borrowing from MPEG-1 and MPEG-2, the MPEG-4 standard extends functionality of audio/video compression by improving format flexibility. MPEG-4 can be used for broadcast television, online streaming media, applications such as videophone, and distribution on digital media.

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.