ID3v2
ID3v2 is a new tagging system that lets you put enriching and relevant information about your audio files within them. In more down to earth terms, ID3v2 is a chunk of data prepended to the binary audio data. Each ID3v2 tag holds one or more smaller chunks of information, called frames. These frames can contain any kind of information and data you could think of such as title, album, performer, website, lyrics, equalizer presets, pictures etc.
One of the design goals were that the ID3v2 should be very flexible and expandable. It is very easy to add new functions to the ID3v2 tag, because, just like in HTML, all parsers will ignore any information they don't recognize. Since each frame can be 16MB and the entire tag can be 256MB you'll probably never again be in the same situation as when you tried to write a useful comment in the old ID3 being limited to 30 characters.
Speaking of characters, the ID3v2 supports Unicode so even if you use the Bopomofo character set you'll be able to write in your native language. You can also include in which language you're writing so that one file might contain e.g. the same lyrics but in different languages.
Even though the tag supports a lot of byte consuming capabilities like inline pictures and even the possibility to include any other file, ID3v2 still tries to use the bytes as efficient as possibly. If you convert an ID3v1 tag to an ID3v2 tag it is even likely that the new tag will be smaller. If you convert an ID3v1 tag where all fields are full (that is, all 30 characters are used in every field) to an ID3v2 tag it will be 56 bytes bigger. This is the worst case scenario for ID3v1 to ID3v2 conversion.
Since it's so easy to implement new functionality into ID3v2, one can hope that we'll see a lot of creative uses for ID3v2 in the future. E.g. there is a built-in system for rating the music and counting how often you listen to a file, just to mention some brainstorm results that are included. This feature can be used to build playlists that play your favourite songs more often than others.
Additional Reading
Copyright
This material is copyrighted by Martin Nilsson, taken from ID3 made easy .