The comment that the hearing is rather like a normal distribution, in fact is true. I did a simple study in college. Though it is much more complex than a signal generator and a pair of headsets. Hearing is anything but flat, with a -3db point at 15K or so. Most people (within 1 std dev) can distinguish between the full quality original and the MP3 rendition. It's not 100% and it varies depending on the music content, People are so used to listing to crap on crap systems they just don't know. My system is crap but I have access to a studio so I know what good as it gets sounds like. People we don't have to listen to crap. Oh please don't be too harsh on old Neil.
I agree that MP3 digital audio is not what it should be in terms of inherent sound quality. I don't really have a way ( at least I haven't take recordings to my spectrum analyzer to verify), but I can determine some artist's recordings are much cleaner, crisper, more dynamic range. So it would seem that the capability is there, just not used. Why? We don't use video caset tapes anymore, even more we're moving from DVD formats. There's a whole new market out there!
The ultimate for me would be the availability of the raw tracks in their native format. Then I could "mix" and "master" them the way I liked and preserve the highest quality or compress as desired. All very possible with today's technology.
We can't forget in this mix that, objectively, the "better" sound of vinyl and tubes is much poorer than most good quality digital. There is more noise (as already pointed out) and more harmonic distortion. The thing is audiophiles LIKE the distortion these formats provide. It is not really that they are truer to the original sound. It is that they are a more pleasant "interpretation" of it. The "warmth" that audiophiles attribute to these formats is not the added noise (pop, hiss, wow, and flutter) it is the distortion.
This can be digitally simulated. It would be interesting to see how a high quality digital recording, the same recording with "simulated vinyl", and a vinyl recording of the same thing fared in a double-blind test.
Vinyl particularly fails as you near the inner radius of a 33 1/3 RPM LP. Insufficient linear velocity plus exaggerated tracking error. Exotic tone arm designs can fix the tracking, but can do nothing about the lack of velocity. Couple that with surface defects, debris, and microphonics, and I don't understand the allure at all. Note, I grew up with vinyl, I still have quite a bit of it, but I won't be buying any new.
You're certainly entitled to your opinion that vinyl sounds "better." But there are also a "whole lot" of audio engineers, musicians and audiophiles - with equally critical "ultimate listening devices" attached to their heads - who think digital sounds "better."
So, subjective opinions aside, we are left with the objective data - i.e., technical specs and measurements - which clearly show that CD/digital is technically superior to vinyl in almost every respect.
The term "MP3" in the headline is being used loosely to refer to lossy compressed formats in general. And while iTunes and its 256-kbps AAC format is undoubtedly the 800-lb gorilla of consumer music downloads, most other services like Amazon and Google etc., still sell MP3s. And MP3 still appears to be the most popular music sharing format.
There is likely a gaussian distribution for peoples ability to hear variations in sound quality. I think a number of studies have been done that show your average person can not tell the difference between a good 256 Kbps MP3 and a non compressed source. Do some people prefer vinyl or tube sound, yes I am sure they do, it depends on what you are used to, both have large problems as pointed out like poor signal to noise and added distortion and the benefit of soft clipping. The biggest problem with recordings today is the over use of dynamic range compression, this works well for cars but is bad for home use. Ultimately most of this is not important, what matter is the content, in which case even in live venues there are usually problems with the fidelity but that is out weighed by the enjoyment of the music.
For the record (pardon the pun), I do believe Golden-eared individuals do exist and are capable of discerning subtle audio artifacts to a degree that would shame us mere mortals, who are evidently satisfied with our "Portable Picnic Players...", to borrow a quote.
But seriously, I would wish and expect any new High Quality digital format to receive unconditional approval from at least a group of industry respected "ears". I agree with Frank E's observation regarding MP3; it is the wrong format to focus on for discussions of audiophile level High Quality audio.