MP3 (known in Geek as MPeG Layer III) is a popular (but slightly controversial) sound format. Like WAV, but unlike MIDI, an MP3 is a recording of sound. This allows for high quality sound or music, one of the complaints about MIDI music. Further, as it is a digital recording, lyrics are possible. Unlike WAV however, MP3 has a compression algorithm which allows a sound file to be a fraction of the size of the equivalent WAV (about 90% smaller).
MP3, however, has many drawbacks. First and foremost is the size of the sound. A MIDI of a song is guaranteed to be much smaller (5-100kb) than an MP3 of the same song (anywhere from 500kb-10mb). Another issue is that the MP3 algorithm is patented, and is protected by licensing agreements. Anyone who makes more than a negligible amount of revenue using MP3s is required to license the compression algorithm.
An alternative is the OGG format, which uses a similar, but more efficient, compression algorithm. This algorithm is not patented, and is free for anyone to use. If you import an MP3 into your OHRRPGCE game, it will be converted into OGG format using madplay+oggenc.