MP3 codecs are only implemented in hardware on really cheap MP3 players - the sort that don't have the CPU power to do it in software. Those devices can't do anything other than MP3.
On anything more expensive - ipods, Sansa Clips, etc., it's all software, and the device can support lots of different formats.
There isn't really much of a battery power win from doing MP3 in hardware, and dedicated MP3 hardware is no good for the other formats that the average user will want to play. The average user may think he has an "MP3 collection", but he is probably not even aware that some of the files are in other formats, because every music player just plays them all.