Adaptive Transform Acoustic Coding (ATRAC) is a family of proprietary audio compression algorithms developed by Sony. MiniDisc was the first commercial product to incorporate ATRAC in 1992. ATRAC allowed a relatively small disc like MiniDisc to have the same running time as CD while storing audio information with minimal loss in perceptible quality. Today ATRAC is used in many Sony-branded audio players. Improvements to the codec in the form of ATRAC3, ATRAC3plus and ATRAC Advanced Lossless followed in 1999, 2002 and 2006 respectively. 
ATRAC's original 292 kbit/s bitrate was designed to be 'close to CD quality' acoustically. This is the bitrate used on original MiniDiscs. Years later ATRAC was improved and is generally considered better than earlier versions at similar bitrates. For purposes of comparison, CDs are encoded at 1411.2 kbit/s, and lossless encoders can encode most CDs below 1000 kbit/s, with significant bitrate reduction for easier-to-encode content such as voice.
Sony's official claim is that ATRAC3plus at 64 kbit/s rate provides a quality comparable to MP3 at 128 kbit/s, which would place this codec in the same league as HE-AAC, mp3PRO and Windows Media Audio (with similar claims from Microsoft).
According to ATRAC engineers, ATRAC algorithms were developed in close cooperation with LSI development engineers within Sony in order to deliver on a tangible product that could encode at high speeds and with minimal power consumption. This is in contrast to other codecs developed on computers with no regard for the constraints of portable hardware.
Sony Walkmans offer better battery life when playing ATRAC files as compared to MP3 files. However, Sony only pushed ATRAC compatibility in Sony Ericsson Walkman series phones in the Japanese market, it is not supported in GSM/UMTS market phones. Sony's Xplod series of car audio CD players support ATRAC CDs. Minidiscs with ATRAC format songs have, in the past, been supported on Eclipse brand car stereos
ATRAC1 was first used in Sony's own theater format SDDS system in the 1990s, and in this context is a direct competitor to Dolby Digital (AC3) and DTS. SDDS uses ATRAC1 with 8 channel encoding, and with a total encoding rate over all the channels of 1168 kbit/s.
Full stereo (i.e., independent channel) encoding with a data rate is 292 kbit/s.
Quality is generally transparent for many people (meaning that it is not possible to tell an ATRAC encoding from the source) . This is most possible when using the latest algorithm, Type-S, or Type-R (Type-S only improves LP modes). Like most other audio compression codecs, some signals will "trip" the codec and cause artifacts, though these are not usually severe enough to be obvious.
High-frequency lowpass depends on the complexity of the material; some encodings have content clear up to 22.05 kHz.
ATRAC1 can also be used in mono (one channel) mode, doubling recording time.
Three stacked QMF split the signal into 4 parts:
RealAudio8 is an implementation of ATRAC3.
A blind test (2003/02) funded by Sony but conducted by third party labs supports the claim that ATRAC3 at 132 kbit/s produces similar quality to MP3 at comparable bitrate.
Scientific testing under PC platform by the European Broadcasting Union has indicated that ATRAC3 implementation in RealAudio 8 at 64 kbit/s was ranked as second best audio codec, only beaten by more advanced mp3Pro and meanwhile maintain superiority over AAC, WMA8 and MP3.  Notice that AAC, WMA8 and mp3Pro can usually count as same technology generation with more advanced ATRAC3Plus.
Common criticisms of similar tests include the supposition that Sony did not implement the top quality ATRAC3 encoder/decoder, the DSP TYPE S, on the PC. Criticisms following indicated that ATRAC encoders are usually implemented on portables with limited power, probably making heavy-duty compression (and hence high quality compression) difficult. However, the criticism is disproved by the fact that Sony has implemented the DSP TYPE S codec in most portable Hi-MD players/recorders (e.g. Sony Hi-MD Walkman model MZ-NH1), and some of the high-end NetMD player/recorder models (e.g. Sony MD Walkman model MZ-N510).
Sony claims the major advantage of ATRAC3 is its coding efficiency, which was tuned for portable DSP which provides less computing power. Therefore Sony claims that ATRAC3 equipment should have better battery performance than other popular codecs.
This reduces the data rate to 66 kbit/s (half that of LP2), partly by using joint stereo coding and a lowpass filter around 13.5 kHz. It allows 324 minutes to be recorded on an 80 minute MiniDisc, with the same padding required as LP2.
FFmpeg has an implementation of an ATRAC3 decoder. It currently supports wav and rm wrapped ATRAC3 file.
This codec is used in Sony Hi-MD Walkman devices (e.g., "Hi-LP and Hi-SP"), Network Walkman players, Memory Stick players, VAIO Pocket, PS3 and PSP console, and ATRAC CD players. It is thought to be a hybrid subband/MDCT codec, though not much information has been released. It uses a relatively large transform window of 4096 samples, four times bigger than that of ATRAC3, it also uses Generalized Harmonic Analysis (GHA). The signal is split into 16 sub-bands before MDCT and bit allocation.
In the recently released SonicStage version 3.2 and 3.3 some more bitrates have been introduced, the available bitrates are: 48, 64, 96, 128, 160, 192, 256, 320 and 352 kbit/s. The newer bitrates are not always compatible with all older hardware decoders, however, some of the older hardware has been found to be compatible with certain newer ATRAC3plus bitrates.
MiniDiscs recorded in this format are incompatible with older players.
In a test conducted by an independent firm, but financed by Sony, it was concluded that ATRAC3plus at 64 kbit/s is equal in subjective sound quality to MP3 at 128 kbit/s, or AAC at 96 kbit/s.
ATRAC Advanced Lossless (AAL) is the latest update to the codec family. It can provide compression for a CD music source at approximately 30-80% that of the original size without any quality loss.
ATRAC Advanced Lossless is one of the very few audio codecs in the market that can provide scalable compression. It records both the information of ATRAC3 and ATRAC3plus, the residual information that ATRAC3 or ATRAC3plus eliminated from original signal. The ATRAC3 or ATRAC3plus data can be extracted just as it is, or the eliminated information can be added to perfectly reproduce the information on the original CD. In other words, ATRAC Advanced Lossless only requires storing one type of data, eliminating the need of data recompression and allowing the file size to be smaller than uncompressed or compressed versions of the same file. Benefits of scalable compression include providing excellent backward compatibility as well as faster transfer speed between portable audio devices and PC.
ATRAC Advanced Lossless is widely supported in older Walkman players and SonicStage version 4 or later. Sonic Stage 4 allows download of ATRAC Advanced Lossless to Minidisc Players and PlayStation Portable. Currently neither the PlayStation 3 or the latest Walkman players support ATRAC Advanced Lossless / ATRAC. Sony has all but dropped the ATRAC related codecs in the USA and Europe and their SonicStage powered 'Connect' Music Service (Sony's equivalent of iTunes) on 31 March 2008. However, it is being continued in Japan and various other countries. From September 2007 Sony now only manufactures in USA and Europe one Walkman Product that supports ATRAC Advanced Lossless downloads / ATRAC - a portable minidisc player.