My understanding is that Lossless is not actually compressed. It is smaller than a regular file but that does not mean the music is compressed. Others who know more than I do have written about this on other threads here with more sophistication, but, my understanding is that a bit for bit rip of a song from CD contains a lot of empty space that is not necessary for accurate reproduction. The lossless schemes have found a way of removing the empty space without removing the vital data. I have read articles where reviewers have made bit for bit comparisons and found the lossless schemes to be bit perfect. So, I disagree with Duane's statment. Lossless files through a DAC in your price range can sound great.