All forms of MP3 Players are just reworked pen drives. Pen drives are a type of universal serial bus (USB) flash drive, which include a circuit board and a USB connector. They work with NAND-type flash memory cards to receive and store data.
-ehow
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An Integrated Circuit reads data from the stored in the flash memory, converts it into a pulse width signal which is then sent through the speaker, they don't use magnets. Your headphones, however, do.