AAC

As there is MP3, there must have been a MP2 and a MP1.
Of course an MP3 player should play all of them.

One day, they decided to drop this backwards compatibility.
If all knowledge obtained while developing MP3 could be used without the historical ballast what would be the result?
That is AAC, Advanced Audio Coding.
It achieves transparency at a lower bit rate than MP3.

 

If you are in need of a lossy compression (portables), AAC is a better choice than MP3.

 

Some people think is is an Apple owned format, it isn't.

 

It is very good in preventing generation loss when doing multiple passes.

Other differences:

• more sample rates (from 8 to 96 kHz) than MP3 (16 to 48 kHz);
• up to 48 channels (MP3 supports up to two channels in MPEG-1 mode and up to 5.1 channels in MPEG-2 mode);
• arbitrary bit rates and variable frame length. Standardized constant bit rate with bit reservoir;
• higher efficiency and simpler filter bank (rather than MP3's hybrid coding, AAC uses a pure MDCT);
• higher coding efficiency for stationary signals (AAC uses a blocksize of 1024 or 960 samples, allowing more efficient coding than MP3's 576 sample blocks);
• higher coding accuracy for transient signals (AAC uses a blocksize of 128 or 120 samples, allowing more accurate coding than MP3's 192 sample blocks);
• possibility to use Kaiser-Bessel derived window function to eliminate spectral leakage at the expense of widening the main lobe;
• much better handling of audio frequencies above 16 kHz;
• more flexible joint stereo (different methods can be used in different frequency ranges);
• additional modules (tools) added to increase compression efficiency: TNS, Backwards Prediction, PNS, etc. These modules can be combined to constitute different encoding profiles.

References

1. Advanced Audio Coding - Wikipedia
2. HTML5 AAC Audio Playback Tests -  Fraunhofer
3. Psychoacoustic Models for Perceptual Audio Coding - Jürgen Herre, Sascha Dick 2019