AAC, which stands for Advanced Audio Coding, and is a lossy compression format, which means that during the compression process, some information is discarded fro the sake of file size. A collection of companies known as the MPEG Group, which includes Dolby, FhG, Sony, AT&T and Nokia, developed the format in the late '90s as a successor to the MP3 audio format. M4A files sold in the iTunes store are made using AAC compression, and many satellite radio stations broadcast songs in the AAC format. It is also the built-in audio codec for Quicktime video.
The MP3 audio format was also developed by the MPEG Group. Designed in the early '90s, it was the first lossy compression audio format to catch on with mainstream audiences, and helped popularize the concept of digital audio files. Because of its age, MP3 compression is not the most effective; a MP3 file encoded at the same bitrate of an AAC file will most likely be of poorer quality. However, it is still the format of choice for many because of its wide compatibility and name recognition.
AAC compresses audio more efficiently than MP3. An AAC file compressed at 128 Kbps (kilobytes per second) will sound clearer than an MP3 compressed at the same rate. If that AAC file is converted to MP3 without compensating for this, the MP3 will sound worse than the original AAC. This can be avoided by changing the conversion settings, though. Converting a 128 Kbps AAC to a 256 Kbps MP3 should result in less audio loss, although the MP3 will be larger in file size.
Many conversion programs can convert AAC files into the MP3 format. Songs in iTunes can be converted to MP3 simply by selecting the formation the "Import Settings" menu under "Edit" and then highlighting the file in question and selecting "Create MP3 Version." This copies the file as an MP3, leaving the original AAC intact. There are various other programs solely made to do audio conversion, many of which are free. Some of the more popular ones include the Free MP3 WMA converter, Free Audio Convert Wizard, Format Factory and Switch. In addition to AAC to MP3 conversion, many of these programs can also convert files to WMA, OGG, FLAC and numerous other audio formats.
AAC files support Digital Rights Management (DRM) and MP3 does not. DRM is a copyright protection system set up to limit how digital content can be distributed and used. Apple's iTunes store used to sell AAC audio files that were encrypted with DRM, these files have the M4P extension. An M4P file cannot be converted easily to MP3 because of this. Instead they must be first burned to a CD and then ripped back to the computer as MP3s. This does create a slight loss in audio quality though. There are programs that claim to be able to "rip" DRM off M4P files, but these programs are in violation of the Digital Millennium Copyright Act and are illegal.