It depends on what you want to do with your files. Playback generally requires 
a widely-supported format, whilst editing will require larger, original files. 
Since iTunes generally rips CDs for playback, that’s probably what you want to 
do.

MP3 produces smaller files that are extremely compatible with ubiquitous player 
devices.  However, the format is not best-in-class, and the iTunes encoder is a 
bit rubbish, so it’s best if possible to use other software to rip your CDs to 
MP3.

Wave and AIFF files are original sound samples.  They are very, very large, but 
they are also compatible.  There is no loss in quality, unlike MP3.  Wave is 
generally the more common.

AAC is a standard for encoding audio that is largely supported by software and 
hardware, but is still less compatible than MP3.  The encoding is superior to 
MP3.  If you have the choice, use AAC.  Apple devices all understand this 
format, and it is the default format for iTunes.  Like MP3, the format is 
lossy; there is loss of information, in theory to a degree that is not 
noticeable at a suitable bitrate.  The iTunes AAC implementation is superior to 
the MP3 implementation.

Apple Lossless is very specific to Apple.  There is no loss of quality, and the 
file format is designed to save space over wave files, but there is almost no 
support among devices not Apple.  Software implementations do exist, though, so 
conversion from this format to other formats for other uses is entirely 
possible.  I use this format for playback from my computer to high-quality 
headphones, but the files are too large for my iPhone, so I use iTunes to 
convert to 256Kb AAC for listening on the go.

Summary: probably you want 256Kb AAC, unless you have hi-fi gear, in which case 
I recommend Apple Lossless.

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