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Playing MP3 is pretty straight forward. You will need a player and some MP3s. The most popular player is WinAmp. You can download it for free at www.winamp.com and the registration is only $10.

This a picture of WinAmp with out a "skin". You can download a skin for it which changes it's appearance, but not it's function. There are thousands of skins to choose from. They match major brands of stereo gear, popular bands and unpopular bands as well. you can download them at the WinAmp sight, major shareware sights and many other places. You can do a web search and find even more. If you are inspired, you can do one of your own and share it. You can make the face double sized to see the controls better, or you can miniaturize it to a tiny bar with only the control buttons showing. The face plate docks with the edges of the screen, if you move it close to an edge, it will snap into place right on the edge.
WinAmp also supports playlists which allow you to save lists of favorite songs. The lists can be displayed in HTML in a web browser and printed.

There are a wide range of "plug ins" for WinAmp, many of which are available
on the web sight. They include signal processors like graphic equalizers,
visualizations which display patterns that react to the music, and input
/ output controls. Input plug ins allow you to play different file types
and output plug ins allow you play to you sound card, or to your hard drive.
When you play an MP3 to your hard drive you are decompressing it. For details,
see the de-compression page.

Real Audio is generally more highly compressed and lower quality than MP3 and they are not really competing formats. Real Audio / video is primarily a streamed format that you listen to / watch directly off a server in real-time, often live. Though you can download files to use later.
The quality of play back will also depend on the soundcard you're using. A cheap generic ISA card can sell as low as $7.99. It will work fine for beeps and buzzers to let you know a program is running or you've got mail, but it's not going to give you high quality music. The Soundblaster Live! Value card runs about $99.99 and has a wide range of options to produce high quality music. There are many good cards out there and your budget will have a lot to do with your decision. Also, the cheap speakers that sell for $9.99 or come free with a CD-ROM won't stand up to a real stereo. The are some nice multi-speaker systems that will give your computer realistic 3D sound. A good card and speaker system will give a home stereo system a run for it's money. If you have an old computer that's not worth trying to sell, you can connect it to your stereo. There are some cheap video cards that can send output to a TV. An old 4.2 GB drive can store 30 to 40 hours of music. Just select the right play list and your set for a whole party or a quiet evening.
If playback is choppy you may need to upgrade your computer or turn off some background programs. I have very few problems with my Pentium 133 laptop with 16 Meg of RAM if it's doing nothing else. With other software running, MP3 skips and jumps. With a more powerful machine you'll have less trouble.
There are also MP3 hardware devices such as the Diamond Rio. It's lightweight,
plays a long time on a single recharge. For now, these devices have serious
limitations. They only have an hour or so of memory and there's no removable
media. After an hour you're listening to repeats until you get to your
computer and re-load it. There will probably be a bunch of new portable
MP3 players soon. I would recommend waiting until a player with removable
media come out. Smart memory (like digital film), Zip Disks, or CDR players
will make these devices really take off. Consult your finances and lifestyle
to see if one would work well for you.