Wired magazine is running a story pondering the MP3 format, how long it will last, and where surround sound is going to fit in. Basically, it looks like it will be around for a while even though better formats, like AAC or MP3Pro, are out. AAC is part of the MPEG4 standard, but a lot of people, like the geeks on Slashdot have issues with Fairplay encoded AACs (or Digital Rights Management (DRM) AACs. Stuff you buy off iTunes Store for example).
For myself, I gave up encoding to MP3 years ago. Most everything I encode now is 160 or 192 (due to cymbals in some jazz recordings getting “washed out” at 160) bit AACs. They sound great on my iPod (and new iPod video), and on both my stereo systems (studio and home).
I see AAC and MPEG4 winning out over other formats, though we will probably have to put up with WMA (Microsoft) formats for a while longer.