MPEG2 is a compression method used to store both audio and video information. It uses a complex algorithm to encode the information for storage and playback. MPEG2 compression is based on the use of "I frames" to create an initial video frame and then stores only the differences between the first I frame and the frames after it. When the image is completely different to the original I frame a new I frame will be created. Because of this method MPEG2 is ideal for storage and playback, but is terrible for video editing. The A/V information found on DVD is MPEG2, and the digital output of a DVD player (or a PC's DVD player card) to a A/V receiver is AC3 i.e. Dolby digital. MP3 is an audio format based on audio only MPEG2. MP3 allows you to encode an entire CD quality album (~70 minutes) to less than 100mb on your hard drive.