In my experience, the sweet spot for compressed on an iPod would be AAC format 196Kps or MP3 format 256kps VBR (variable bit rate) for maximum music given your listening situation, (ear buds.)
Anything more would reduce the amount of music without much gain in fidelity that you could hear on ear buds.
Anything more would reduce the amount of music without much gain in fidelity that you could hear on ear buds.