Itunes: Plus Aac

AAC is the newer, smarter younger sibling of MP3. It uses more advanced psychoacoustic modeling (fancy talk for "how the human ear actually hears sound"). AAC delivers clearer highs, better stereo imaging, and fewer artifacts (like "swirly" sounds or watery cymbals) than an MP3 at the same bitrate.

The short answer:

Don't let the "lossless hype" fool you. For real-world listening, iTunes Plus AAC remains the gold standard for purchased digital music. itunes plus aac