Fatparrot: There is no loss when decoding an encrypted FLAC, Apple Lossless, or WMA lossless file. I'm sure there is some way to prove this mathematically, but empirically folks have encoded literally millions of music files in these formats and there has been no published instance that I know of where a file did not decode correctly when the software worked properly. That is certainly enough experimental evidence for me to believe the lossless claims.
Some folks claim to have heard differences between FLAC encoded and WAV (unencoded) files on some systems, but given the subjective nature of audio it's hard to know if this is a real or imagined difference. There is some thought that the processing required for decoding may effect the overall audio chain and introduce some difference if it sufficiently taxes the system, but all of the algorithms I mentioned require very little processing to decode. On a PC or Mac where computing power is in abundance, it's not likely that there would be any effect. On a Squeezebox or Airport Express unit where the processor is significantly smaller there may be a possibility, although it's hard to imagine how it might occur. I have a Squeezebox and have it set up to decode my FLAC files on the PC first and then stream PCM (WAV), and I hear no difference between the FLAC files and the original WAV files from the CD.
Note that none of the things I mentioned are due to incorrect decoding of the files. Lossless means just that and the only difference between an encoded file and the original WAV (or AIFF) image is size and the ability to store tags information.