I did a blind listening test a couple of weeks ago comparing MP3 at 320kbps using iTunes' encoder, MP3 at 320kpbs using a LAME encoder, and Apple Lossless. Here's my setup:
4G (b/w) 40gb iPod-->Dock Connector/Cable from audiolineout.com-->Headroom Micro Amp-->Sennheiser HD600 with Cardas cable
I used the iPod for the test since I do probably 80 percent of my listening on it.
I put the 3 versions of each song in its own playlist, turned shuffle on, hit Play, and sat back and listened, jotting down which one I thought best and then back up to see which one was which.
The results? I thought the LAME songs sounded best 2 out of 3, and on the 3rd one, it was pretty much a toss-up. The Apple MP3 actually came in second ahead of ALAC once, and third the other two times.
I'll admit, that at 54, my hearing may not be all that it once was, but then again that may be a benefit here as I can put 3 times as many LAME MP3s on my hard drive and iPod as ALAC songs. Plus I wasn't very happy with previous experiments with ALAC as songs--especially long ones--there would often be a slight pause in the middle of songs caused, I presume, when the hard drive had to feed extra data to the memory cache. And using it in the car was impossible as it would do that pause thing everytime I hit a bump (and on California freeways, there's LOTS of bumps)--very annoying.
Anyway, I'm going with LAME MP3.