My app downloads an mp3 from our server and plays it back to the user. The file is 64 kbps (which is well within the acceptable range for iPhone if I understand correctly).
From iOS 7 AVAudioPlayer has new initializer
NSError *error;
[[AVAudioPlayer alloc] initWithData:soundData fileTypeHint:AVFileTypeMPEGLayer3 error:&error]
The supported UTIs
NSString *const AVFileType3GPP;
NSString *const AVFileType3GPP2;
NSString *const AVFileTypeAIFC;
NSString *const AVFileTypeAIFF;
NSString *const AVFileTypeAMR;
NSString *const AVFileTypeAC3;
NSString *const AVFileTypeMPEGLayer3;
NSString *const AVFileTypeSunAU;
NSString *const AVFileTypeCoreAudioFormat;
NSString *const AVFileTypeAppleM4V;
NSString *const AVFileTypeMPEG4;
NSString *const AVFileTypeAppleM4A;
NSString *const AVFileTypeQuickTimeMovie;
NSString *const AVFileTypeWAVE;