Yes and no. Yes the songs are locked in to the ipod. Basically the transfer of songs is drag from whatever folder your media is stored in and sync, thats it.
I personally think its a vast improvement over itunes. But it doesn't allow you to use other formats that it does not natively support, so no FLAC or anything. As I stated before, its not a mod, just software. Software does have limitations, but its not a bad alternative.
Media monkey is a better option, and it can transcode as it copies files to the ipod/iphone. Sadly it can't convert flac to apple lossless, but it can convert to wav (if you have the capacity), or mp3.