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An MP3 encoder is the software using an MP3 Codec (compression/decompression algorithm), to make MP3s.  Most encoders convert wav to mp3 although many can convert other formats such as WMA to MP3.
There are very few unique encoders.  Most software out there uses only about 4 main encoding engines due largely in part by the patents held by Fraunhofer-Gesellschaft and other companies that helped produce the ISO source that MP3 is based on.  Although no one company owns exclusive rights, MP3 software companies must pay a licensing fee to develop their own ISO source encoder which is expensive.  The major encoding engines are LAME (non-ISO source), BladeEnc, Fraunhofer Encoders, and Xing.

What is MP3 encoding?

MP3 encoding is the use of MP3 encoder software and a MP3 codec to produce MP3 format files that can be transferred to or played by any digital audio device that is capable of reading the MP3 file format. The codec contains an algorithm applied by the encoder to compress digital sound data to MP3 format from other audio file formats. The encoder determines how, when, and where compression is applied.

What does MP3 encoding do and how?

The encoding process reduces the amount of sound data, to the least amount that still sounds like the original by applying a compression algorithm to filter out the smallest, least discernibly heard parts, and then, efficiently compresses the remaining sound data into an MP3 file that is much smaller size.

Why so many Encoders and Codecs?

While the MP3 file format may be standard, the algorithm used to encode and the application of compression to the sound data is not. The original MPEG-1 compression algorithm has become quite dated. Many MP3 encoders have since been created utilizing newer algorithms. Each of these encoders produces files of different sound quality.

The Trade Off: Quality versus File Size, Does Size Really Matter?

The MP3 encoding process is considered “lossy” in the sense that original sound data is lost as a result of the process. Generally, the larger the file, the less compression has been used, and the better the quality of the sound.

What is Bit Rate?

One key to the trade off is the bit rate. The bit rate determines the amount of compression used by setting how much file size is used to encode one second of sound by the encoder. The higher the bit rate, the better quality of the sound, and the larger the file is. However, using too low of a bit rate while encoding an MP3 file will not only result in a bad sound quality, but it may add odd noises called compression artifacts that weren’t originally present in the sound data.

Variable Bit Rate (VBR)

Simple MP3 files are created using the same or constant bit rate for the entire encoding process, but MP3 files can be created that have a variable bit rate. Variable bit rate MP3 files can be encoded to retain more of the original sound quality without increasing the size of the file produced by decreasing compression of those areas in the sound data that are more preferable while increasing compression of less complex areas of the sound data.

Are All MP3 Encoders Equal?

The Quality of the MP3 encoder as well as the encoding parameters set will also affect the quality of the sound of the MP3 file produced, but most encoders are based on only four different encoding engines. There are plenty of comparisons between the various encoders to make the choice easier.

Licensing and Patent Issues

The MP3 file format made it possible to electronically copy and transfer copyrighted audio works. Care should be taken that copyright laws are not being violated when encoding or decoding MP3 files. Some MP3 encoders and MP3 codecs could be privately, legally owned and require payment and registration before use. The original MP3 file format creation was a collaboration between many people and their companies across many different countries. Many of whom (Fraunhofer-Gesellschaft), have registered a number of various patents regarding parts of the MPG3 format. Due to this, MP3 software developers must pay an outrageous fee to obtain a license to develop their own encoder, despite no one particular company owning the rights to the MP3 format.