The Apple Lossless Codec.
Essentially MP3 and AAC are "lossy" codecs as they alter the waveform in the process of compressing the data stream, they use a system called Perceptual coding to try to measyre what you would hear in the mix, then they mask the stuff it's assumed that you can;t hear. It works to an extent, but alters the sound of the recording.
Lossless compresses the data size but is able to recreate the waveform almost identically so the track sounds the same as if coming off CD. the drawback with lossless is that the data savings are typically 50% at best, so the files are still very large when compared to a 128Kbps MP3.
All my audio is lossless encoded, but then I'm an audio professional and have very good ears, very clever headphones and a 160Gb ipod.