Digital audio can be stored as compressed files, which indicates some loss but greater scope for storing in portable devices. There is a variety of compressed formats available and, although still differing in encoding method, the preference is up to the user or dependent upon device-compatibility.
The MP3 is the most common of compressed formats, compatible with most devices and easy to store on your PC. MP3s offer some flexibility with regards to size versus quality, as small as ‘phone quality’ to as large as ‘studio quality’ MP3s (256kbps.) This format is also used to send demos of your music to producers over the internet, or generally to promote your own production work.
RealAudio is the proprietary format used by Real Networks and its primary scope is to stream radio transmission or generally to broadcast live audio feeds. The quality isn’t great but it is also used if you’ve set up a home internet radio station and wish to broadcast your playlist to the world.
WMA is an alternative to MP3, however it does not offer as much flexibility in terms of quality when encoding. The file sizes tend to be somewhat smaller and it is still used, it remains simply a matter of preference.
These are the main types of storage. There are many other types, particularly regarding compressed formats, such as lossless or lossy formats, and I would recommend this excellent guide provided by Informit.com.