MP3 in Sky
The answer is "Both."
The jack allows you to hook up your MP3 player, IPOD, Computer Audio Output Jack, or portable DVD player output to the SKY sound system. (Why you would want to watch a DVD in a zipping SKY I will never know.) Think of a headphone jack on all of these devices. The SKY has a similar jack in the front of the radio, but it's an INPUT and not an OUTPUT jack. I have a cable that has "headphone plugs" on both ends that I use to connect my stereo to whatever input device I want to plug in. So, in effect, the SKY Monsoon sound system becomes the "Headphones." Personally, I have a Sanyo MP3 player. As soon as I plug in my little cable the Monsoon detects it and switches to "Aux Input" mode. I can adjust the volume by using the volume on the MP3 player, or on the Monsoon, or on both.
As for the disk option, the player can read standard CD encoding, or a disk that has MP3s on it. You should be able to fit 100+ songs on a typical disk when you store MP3s. The quality is not as good as on a CD, but like you would have on an MP3 player...
I hope that helps.