Mike, I know as much about players as you, but I think, different extentions show different uses of a sound file. Wav is a small, sign sound, and mp3 is able to give you music in a very good quality. To listen to music in digital, you have to compress the music information, which always causes worse quality. This transformation can be done in several ways, can end up in different file formats, but the better the quality, the higher the file size. And the same with the video.
In my opinion listening to music, people should sit down by a record or cd player, with an average hi-fi system, and for all else you can use the computer.