More digging. Sidssp is correct about DRM protection of standard iTunes files. Also, Apple has introduced another download format called "iTunes Plus" that downloads AAC files in 256kps format that are not DRM protected.
The good news is these "Plus" files definitely sound better than regular 128 kbps AAC files (but still not Apple "lossless" or AIFF level of content), and cost the same 99 cents as regular songs. You can find the link to the iTunes Plus page in the Quick Links box in the upper right hand side of the iTunes Store's home page.
The bad news is that only 90 albums of the iTunes inventory appears to be available to download in this new higher quality format. Apparently all other iTunes titles are currently only available as 128kbps AAC files. This is probably not a big deal if you principally download songs for use on your ipod. For use on pretty much any home HiFi system, I think you will notice a significant drop in quality compared with redbook CDs, or better.
I like being able to download individual songs. Are there other Internet venders that sell a wide selection of individual song titles available for download in higher quality/larger file formats (WAV, AIFF, lossless or similar)?