Can play any uncompressed 22KHz, 16bit, mono Wave (.wav) files of any size. While it isnt CD quality, it is certainly good enough to play music, have spoken word, or audio effects. Check out the demo page on Adafruit.
Output is mono, into L and R channels, standard 3.5mm headphone jack and a connection for a speaker that is switched on when the headphones are unplugged
Files are read off of a FAT16/FAT32-formatted SD/MMC card