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I think the incompatibility comes from the way that different formats reduce the file size. Audio is largely compressed by removing the sounds that are hidden to the human ear by other sounds in the recording. Different audio compressions are based on different models of what is audible and inaudible. Let's say that MP3 decides to remove 50% of frequencies, leaving 50% of frequencies that make up 95% of the audible song. On first guess, you might say that re-encoding into OGG will reduce that quality again by 95%, to roughly 90% of the original. However, much of the 50% of the frequencies found in the original file that OGG would need to keep may have already been removed by the MP3 encoding, assuming that the audio models are different.
I'm struggling to explain something I'm not sure about here, so anybody with a better explanation, please chip in!
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