MP3: Quantity vs. Quality

I was having dinner with a good friend of mine. We were listening to some fine violin jazz work he had recorded recently. We got to discussing the role of MP3's in today's digital age. I related comments I'd read by acclaimed musician Peter Gabriel on the subject (full article):

With the explosion of the digital world, which is really flourishing on the corpse of the music industry, the only thing that people haven't noticed is that we have taken a giant leap backwards in terms of sound quality.

From a musician's point of view, we spend a lot of time trying to get things to sound good, so it seems a pity that we have all accepted these super-compressed MP3s as the standard, which just kick the shit out of what you've recorded. There has been a huge access to quantity at a sacrifice of quality.

I have to agree. MP3's seem ubiquitous and yet they really are of inferior quality compared to CD's, which in and of themselves could be improved. And yet people are willing to pay big bucks for HD and Blu-ray. So why are they willing to settle for second best in the audio arena?

N.B. - Don't get me wrong. MP3's are great when you're on a plane or jogging around the block, where the ambient noise is high enough that high quality audio is lost on the surroundings. But when you want to really appreciate the work of an artist, at the very least a CD is much closer to the way it was meant to sound.