Great explanation of lossless compression from Kirk McElhearn:

“Imagine that you have a text file with, say, the complete works of William Shakespeare. This text file contains 908,774 words, and takes up 5.6 MB on disk. If I compress the file using OS X’s built-in Zip compression, the same file takes up just over 2 MB, or about 36 percent of the original file size.

“Lossless compression for audio works in a similar way. Unlike, say, AAC or MP3 files—where psychoacoustic models are used to determine which parts of the audio can be removed without affecting what you hear—lossless compression formats simply compress all of the data in a file. When played back, these files are decompressed on the fly, so the compressed data becomes audio data again, in a bit-perfect equivalent to the original. Nothing is lost, just as none of Shakespeare’s words are lost when I decompress the zipped file.”

There’s value to storing your music files in a lossless format. Considering it? Read the article.