iPod plays mp3s. it's an mp3 player, made by Apple. The catch is, you have to use Apple's proprietary "iTunes" software with it. Some people don't like it, so they get some other brand of mp3 player. The iPod is also pretty expensive, because you're paying for Apple's name.
All that having been said, I've owned a couple iPods in my time and I love them. iTunes works well, the iPods work well...and the latest one I got, the 160gb "classic", holds all my music and videos comfortably. I don't know of any other player like this that has that much space on it, is that small, and is that easy to use. So, personally, I recommend it. However, I do think they're phasing out the classic, which is a shame. They need to replace it with something else, because solid state memory, which is what the Touch and iPhone run off of, is still far behind HDD in terms of space. I'd love to have a Touch, but I think the biggest ones only hold 16gb. Bah. That's nothing. To me, the most important thing is being able to hold my massive library in one place. But if you only have a few gigs of music, then you can go smaller. I suppose it's all about personal preference...