The ability to play these digitally compressed audio files is not the exclusive province of digital music players or computers. These days many CD, DVD players and other devices have the ability to play these formats. Regardless of the method used to play them, they are all lower quality than the original, and while they may sound ok pounding out Van Halen to the pounding of your heart on a cheap pair of headphones while you're jogging, put the same material out through your HiFi system and you're very likely to pick the difference in quality immediately.
This is not to say there is not a place for the mp3 music format. On the contrary, this format has opened up the ability to store and play a sort of background soundtrack to your life. It's the sort of music you have going while you're doing something else. It's quantity, randomness and familiarity more than makes up for it's lack of detailed audio quality. It's like a radio station that only plays songs you like.
When you really want to enjoy a piece of music though, there is no substitute for a high definition mastering on CD, DVD-Audio or even better SACD to indulge the senses in the intricacies and beauty of the melody.
The ability to play files stored on a remote source is what we mean by network distribution. This has several advantages over the traditional CD jukeboxes that were more common in the 80's and 90's. Namely the ability to play multiple tracks simultaneously to many devices. The ability of hard drives to read much faster than is required by music, enables the same song to be played on many different players from the same source simultaneously, or even with each player stagger-started 1 second between.
Network distribution allows there to be one centralised store of music, which assists in maintaining the database, and many points of access.
The device requesting the mp3 file and playing it is known as the client. The device storing and providing the file is the server.
The client can be either a hardware device, like a network enabled receiver, or it could be software, such as a media player on a pc.
The server likewise can either be a standalone device like an Imerge for instance, or it can be a software program running on a PC. Either way, in order for them to provide instant access to songs, they must be powered on 24 hours a day.
The standalone device has advantages in that it is by nature almost immune to viruses and other attacks. It is also far more robust at doing it's job than the far more complex PC (which is a general purpose machine)
The disadvantages are the availability of software updates, and the flexibility of the hardware to grow and develop.
What they all have in common is that they communicate using common TCP/IP internet protocol.