Put simply, MD is compressed CD data. It is in principle the same as MP3. However, the compression algorithm MD uses (ATRAC) is far superior to MP3, according to my ears and many others on these forums.
When you compress CD data, you throw away sonic information that is supposedly "inaudible", in order to reduce the file size. However, no compression system works this perfectly. With a very good hi-fi setup, you will hear clear differences between MD and CD. You'll probably even hear it even if the equipment's not that good, in quiet listening environments. However, in a portable environment (which is what MD was designed for), the artificacts created by ATRAC become almost, if not completely, negligible.
Couple that with the fact that, as erikzen pointed out, modern MD portables are of far better quality than modern CD portables, for truly portable use MD is usually the best choice. It is for me, anyway. I hate carrying around my valuable CD collection, and MD's don't get scratched due to their very portable-friendly design. Oh yeah, and they're tiny.
But no, as a format, MD cannot sound better than CD. It just comes awfully close when used portably.