File extension: .ac3 Developed by: Dolby Laboratories Type of format: Audio file format MIME: audio/ac3 Dolby Digital, originally synonymous with Dolby AC-3, is the name for what has now become a family of audio compression technologies developed by Dolby Laboratories. Formerly named Dolby Stereo Digital until 1995, the audio compression is lossy (except for Dolby TrueHD), based on the modified discrete cosine transform (MDCT) algorithm.