MP3 is an audio format that can compress and encode an audio file. It uses the lossy compression algorithm to contain audio data. The lossy compression helps to reduce the data significantly without losing audio quality. MP3s are created using different bit rates maintaining the original quality.
AAC is an audio file format that works similar to MP3 but compresses more than MP3. It significantly reduces the audio file size without losing the quality. To reduce the file size it uses the MPEG-4 standard to cut off the low frequency sounds that cannot be heard in a human’s ear.