A WAV file will repeat the same O/I over and over again if necessary to complete a track where a FLAC (or similar file) will take note of repetitive O/Is and effectively reduce the file size. MP3 takes it a step further by doing more interpolation.
Roughly speaking, FLAC notices that there is 999 zeros and instead of "000....000" outputs "999x0". Or, if there is 499 zeros, then 1 one, then again 499 zeros, it outputs "499x0,1x1,499x0", where PCM would output "00000000...0000000000000100000000000...0000000000". In the latter situation, MP3 will believe that there is nothing significant in that "one" alone, and that it could be safely ignored, so MP3 outputs "999x0". It is not quantitative difference between FLAC and MP3 like "MP3 is doing more interpolation and FLAC is doing less interpolation". It is qualitative difference, MP3 does throw some insignificant (by its opinion) bits away, and FLAC preserves every bit.
This is why FLAC is called lossless and MP3 is called lossy. Lossless = there is no any loss of data, you can convert FLAC back to PCM WAV, and the resulting file will be bitwise identical to the original one; it is just like putting your documents into a ZIP archive doesn't make these only "99% identical" to an original ones. Lossy = there is loss of data (although it could be barely hearable), and if you will convert MP3 to PCM WAV, it will not be bitwise identical to the original one.
FLAC is 100% identical to the original. MP3... well, it depends of the exact codec you use, of its settings, and of how you will measure that percentage... that could be somewhere between 1% and 90%. AAC... let's say about 5% and 95%. Generally, AAC produces better results than MP3 on the same bitrates. Both will never produce 100% result (unless you're compressing silence),
Edited by penartur - 9/23/10 at 11:28am
