Files with the .ram file extension are used by RealPlayer to play offline or online audio files on your computer. RAM files contain URLs to other RealMedia files, such as .rm files in which the actual audio or video content is stored.
The first version of RealAudio used a proprietary protocol called PNA or PNM to send streaming audio data. RealNetworks later switched to the IETF standardized Real Time Streaming Protocol (RTSP) but they use RTSP only to manage the connection. The actual audio data is sent with their own proprietary RDT protocol, which they initially kept secret. Recently, some specifications for the RDT protocol have been made public through the Helix Community project. The open-source MPlayer project eventually developed a means of playing the RDT streams.
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.