When MP3 became popular in late 1996, group of people started wondering if there would be a solution for the lack of information in audio tracks stored in MP3 format. Basically the problem was that even most advanced rippers who distributed audio tracks in MP3 format, included the information about album, track name, etc inside the filename, some morons renamed these names into something else that didn't provide the same quality of information anymore. So, ID3 was born.
ID3 is a small piece of information stored physically inside the MP3 file (in the beginning or in the end of the file, depends on ID3's version). ID3 tags (as the pieces of information that ID3s contain are called) can contain various information about the MP3, like album name, song name, artist, original artist, genre, composer, releasing year, additional comment fields, etc.. Nowadays ID3s are de facto in audio world and they can be added to most of the audio formats and even to certain video formats in order to provide additional information of the file.