Good post, Sfar! I'll add a bit more for those who might want to understand a something more about the various formats. As Sfar points out, you can have a verbatim copy of the information on the shiny silver discs placed upon your hard drive in AIFF or WAV file formats. You can also use a lossless compression format like Apple Lossless which takes up half as much space yet (arguably) does not loose/alter a single binary digit of information from the full file version.
When you choose to rip your files in a smaller, compressed format, such as mp3 in its various manifestations, you are compressing the information into a smaller file with fewer bits of information to describe the same passage of music. What this means, in laypersons terms (and anyone feel free to correct or modify this explanation); given a specific passage of time in a piece of music, for instance, lets say three seconds of a piano sonata--that passage of time is defined to the computer, and later converted to information passed on to the DAC, in so many zeros and ones, or bits of information. Those very bits of information, those zeros and ones provide all the information to convey through the remainder of your system every little nuance, tonal shift and timing cue in those very three seconds of that piece of music. If the original file on your shiny silver CD has, and I'm entirely making up this number, two thousand bits of information that define those three seconds, then a compressed version of that very same three seconds may, instead, contain only 300 bits of information to define all the same nuance, tone and timing. How does the computer come up with 2000 bits of information worth of music, given only 300 bits to work with? It makes an educated guess in uncompressing that information, those 300 bits, in just what might be missing. Though it may do an OK job at it, keep in mind that over time those three seconds are multiplied out over minutes and hours of music that you are choosing to listen to an ongoing 'educated guess' at all that missing information. It's not just the notes of music, it's the PRAT (pace, rhythm and timing), or everything that goes into that, which is contained in that information. To some the resulting sound is degraded enough to choose larger, denser formats and just spring for more storage space, while others find the 'educated guess' version to be acceptable, and may not hear and or care about the differences. Personally, I do hear and care very much about the differences, so choose to use lossless file formats.
More loosely you can think of it, in the example I've made up, as a 2000 word essay, edited down to 300 words and interpreted back to its original length. How accurate can that interpretation really be? That's an exaggerated metaphor, but it does give you an idea of whats going on here, in case you might be computer-phobic.
The best way to determine which format is right for you is to rip the same few familiar CD's in the various formats you are considering. Listen to both, at length...if possible, do this with several CD's and give it a long listening session in each of the formats. If you can't tell a difference then rip to the more compressed format and save space. On the other hand, storage space is very cheap and I actually don't see much of a reason for this unless you do the ipod thing, or like to send songs via email. A 500GB external drive can be purchased for under $200 right now - that'd hold about 1700 CD's in Apple Lossless format!. The reason to really make sure you want to compress, if you are attracted to that route for whatever reason, is that ripping the CD's to your hard drive (getting the information from the CD onto your hard drive) is a time-consuming project no matter which format you choose. It's not something you'll want to do more than once with a large collection of CD's, so it's best to err on the high-resolution side. You can always reduce a lossless file to a more compressed version, but you can never go the opposite direction.
Hope that helps others considering making the leap.
Marco
