I have googled this topic and there seems to be a wealth of information concerning this topic. I would like to add my 2 cents and most of the threads that I found were old. As I am big into headphone listening, I decided to post here. I have the AKGK701 paired with the HeadRoom Maxed Out Home Headphone Amplifier at home and a Stax Pro Lambda system with its solid state amp at work. I've compared files using my headphone system, custom car audio system, and home (not headphone) audio system. Here are my observations. I have found that Exact Audio Copy (with AccurateRip) is essential in getting quality mp3s from my CD library. Together with Lame V0 (VBR, approximately a 288 kbps bit rate overall), MP3 sounds great. EAC (test and copy) + LAME does a much better job than the much quicker iTunes ripping. There are four important variables in being able to distinguish between quality mp3s and FLAC: (i) the quality of the equipment you own, (ii) the quality of your hearing, (iii) your trained ability as a critical listener, and (iv) environmental noise or distractions. A final variable is even more important: some people can distinguish between the two when they focus their attention and try, but the important question is how much your enjoyment of the music is improved by FLAC. If you can hear a difference but consider it too small a difference to matter, then you don't need FLAC. There is one final variable, consideration for other people. Even if your ears aren't the best, you're not a critical listener, or are easily pleased by music, you *may* want to use FLAC if other people will be appreciative it. Most people (probably 90% or more) will be satisfied with good mp3s, because one or more of the criteria mentioned above are not met. For instance, it would be impossible for almost everyone to tell a difference between mp3 and FLAC in the average car going down the highway (poor equipment in a noisy environment). People on the move (iPod) will also likely not notice a big difference due to midfi/lowfi equipment and environment. Some mp3s are much more easily distinguished as different than live (or CD). Namely, many people can distinguish 128 kbps mp3s from FLAC. I really don't think there is any reason for 128 kbps mp3s considering the storage available today. Free Pandora delivers a 128 Kbps stream of music, and it is tolerable to listen to even though it's lesser quality is obvious. Pandora One upgrades the performance to 192 Kbps. MOG is the winner (at least to me), providing its music at 320 kbps. However, each person should decide for themselves what format is right for them. They should do this not by listening to what other people claim is right nor by simple guessing based on the variables listed above. There are some people who claim they can hear the difference when a person places a dime underneath one of their speakers. Of course, I don't believe that. Conversely, I know that there are some people who have excellent hearing and are very critical listeners that can hear things correctly when I can't. I suggest making a CD, USB, or other digital recording (according to the source you will use) of FLAC and different mp3s that you know well. Volume match the songs if possible. Allow a friend to play different tracks and see if you can tell a difference using the audio system and while in the environment that you will usually be listening. I tested myself. In the quiet with my audiophile-quality home stereo, I can tell the difference between 288 mp3 and FLAC with A vs B comparison. Although my equipment is of audiophile grade, my ears are those of a 44 year old male who has heard too many live concerts and high-powered sonicators. It would be very challenging for me to correctly distinguish the two, without A to B comparison and within 20 seconds for each song, 7 times correctly out of 10 songs. (My personal criteria for establishing a clear difference that matters). I really can't tell the difference between uncompressed wav files and FLAC files. Knowing this, I decided to record my entire library in FLAC. However, I will convert my library to high quality mp3's for my iPod. For good digital music, a good DAC and jitter control are very important, but currently those things should not cost a mint. You can download studio quality music direct to your computer onto media that does not scratch or corrode (www.hdtracks.com), but that can be backed up onto CDs or DVDs.