Squeezebox2 supports mp3, flac, and wav in the hardware - so these are
natural choices if you're starting from scratch.

The other route is flac - http://flac.sf.net/. flac is a lossless audio
compressor. This means your music should sound the same as CD, at the
expense of greater file size than mp3.

You'll get compression of 20 - 60% with flac depending on the style of
music. Typically it uses about 3-5x as much space on disk as a high
quality mp3 file.

Again, you may or may not be able to tell the difference with your
equipment and ears, so add some flac files to your listening mix. Get a
friend to help you perform a double-blind ABX test if you're really
serious about it. :-)


-- 
jth
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