Audio Compression Algorithms:The goal of the digital compression algorithm is to produce a digital representation of an audio signal which, when decoded and reproduced, sounds the same as the original signal, while using a minimum of digital information (bit-rate) for the compressed (or encoded) representation. Different types of compression algorithms exist. This paper will discuss AC-3 and MP3 algorithms. Any application using compression needs two steps at a minimum. A chip or coder for compression and a decoder for decompression.