View source for Technical Information on the difference between Normalization and Replay Gain

The '''normalizing process''' decompresses the mp3 file as a WAV, finds the maximum value in the file, then calculates a normalization factor and multiplies all values by this factor.  It then recompresses the file to mp3 again, thus overriding the original mp3.  In other words, you can no longer access the original mp3 file.

'''Replay gain''', on the other hand, analyzes the mp3 file not only for the peak value, but by using a 'volume over time function' to compute the average volume (that’s what your ears will adapt to). Since the output level is only a math function, you can manipulate it very easy. You need to store only this one value with your file header. You don’t change the sound of the file. During playback (replay) it is fed into the bitstream by increasing or decreasing the volume by this value. A similar effect would be sliding the volume control by the exact same value up or down.