Retailing giant Wal-Mart has begun selling digital music downloads in a high-quality but unprotected MP3 format, marking what's perhaps the most effective offensive yet against market leader Apple Computer. Wal-Mart says it's offering "thousands" of digital albums and individual tracks in the highly compatible MP3 format, which should work with virtually every portable digital media player currently available, including the iPod.

Wal-Mart's digital music offerings are now split between the original format used by the service, a version of Microsoft's Windows Media Audio (WMA) with Digital Rights Management (DRM) protection, and the more compatible and unprotected MP3 format. The MP3 downloads are encoded at 256Kbps, matching the encoding rate Apple recently chose for the small range of unprotected Advanced Audio Coding (AAC) tracks it's selling from its iTunes Store. However, AAC offers poorer compatibility with PC-based software and portable media devices than does MP3.

Thanks to the unrestricted nature and format of the new music offerings, Wal-Mart's new MP3 songs are also compatible with Apple's highly successful iPod line of portable media players, unlike the WMA versions. This, too, should make the service more interesting to consumers.

Wal-Mart is offering MP3 versions of albums and songs from artists on both Universal and EMI. Individual songs are 94 cents each; albums are $9.22. (A few albums are sold for far less.) Apple typically sells individual songs for 99 cents and albums for $9.99, and has fought efforts by the recording industry to offer consumers variable pricing, which could raise prices for newer recordings but dramatically lower prices for the labels' extensive back catalogs.

Although EMI and Universal are on board with DRM-free music, other major record labels such as Sony BMG and Warner Music Group are currently evaluating the move. Though they are the first, Wal-Mart isn't the only service allowed to sell unrestricted MP3 files: Other retailers, like Amazon.com, Best Buy, Google, and Rhapsody will soon announce similar offerings.

In related news, yesterday MTV announced that it will drop its high-profile but hugely unsuccessful URGE music service and will instead partner with Microsoft competitor RealNetworks and its Rhapsody service. This is a huge blow to Microsoft, as URGE was the centerpiece of the most recent release of its media player software, Windows Media Player (WMP) 11, and a showcase for what a good Windows-based music service could be like. MTV and Real will also partner with Verizon to provide a version of the service to mobile customers.