Real Audio is an audio format. It was first introduced by RealNetworks in 1995, the current version being Real Audio 10. Files of this format usually have the extensions of RA, RAX, RM or RAM. Real Audio is often used as a streaming audio format (can be played at the same time as it's downloaded) due to its ability to conform to low bandwidths. This makes Real Audio a common format for many internet radio stations.
RealAudio was developed as a streaming media format, meaning that it can be played while it is downloaded. It is possible to stream RealAudio using HTTP. In this case, the RealAudio file is retrieved similarly to a normal web page, but playback begins as soon as the first part is received and continues while the rest of the file is downloaded. Using http streaming works best with pre-recorded files. Some alternative protocols have been developed which work better for live broadcasts. In many cases, web pages do not link directly to a RealAudio file. Instead, they link to a .ram (Real Audio Metadata) or SMIL file. This is a small text file containing a link to the audio stream. When a user clicks on such a link, the user's web browser downloads the .ram or .smil file and launches the user's media player. The media player reads the pnm or rtsp URL from the file and then plays the stream.
MP3 is a digital music format which allows CD tracks to be reduced to around a tenth of their normal size without a significant loss of quality. MP3 gets rid of a lot of the information recorded in a song that our ears are not able to hear and then uses complex algorithms to reduce the file size. This then enables you to get hundreds of songs on to a CD and it also has opened up a new market over the internet - the download market as download times have been significantly reduced.
The MP3 format is a lossy format. That means that an MP3 file does not contain 100% of the original audio information. Instead, MP3 files use perceptual coding. In other words, that means it removes the information that your ear doesn't notice thereby making the file smaller. The reason lossy formats are used over RAW is that RAW audio files are too large to travel over the internet at any great speed. By using lossy formats it enables even dial up users to download mp3 files at a reasonable speed. RAW file formats generally require 176,000 bytes per second compared to a lossy format which requires 17,600. The difference is massive and so are the download times.